ITO, WARD-4(4), THANE vs. SHRI HIMANSHU PRAVEEN JAIN, MUMBAI

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ITA 418/MUM/2021Status: DisposedITAT Mumbai15 March 2022AY 2010-113 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that while the purchases were from the grey market, a 5% disallowance would meet the ends of justice, considering the assessee is in manufacturing and not trading.

What were the facts?

The Revenue alleged bogus purchases by the assessee from five parties. The Assessing Officer made a 100% addition to the total purchases. The CIT(A) reduced the addition to 25% on the grounds of grey market purchases.

What were the issues?

Whether the addition on account of bogus purchases should be deleted entirely, partially, or fully, and what is the appropriate disallowance percentage for grey market purchases.

Which sections of the Income-tax Act were involved?

Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SHRI SHAMIM YAHYA

For Appellant: Shri Bhupendra Shah
For Respondent: Shri T.Sankar, Sr.AR, Shri Bhupendra Shah

O R D E R Per Shamim Yahya (A.M):

This appeal by the Revenue and cross objection by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-3, Mumbai (‘ld.CIT(A) for short) dated 03.08.2020 and pertains to the assessment year (A.Y.) 2010-11.

2.

The issue raised in revenue appeal is that ld.CIT(A) erred in deleting the addition of Rs. 10,18,735/- out of the total addition of Rs. 13,58,313/- made on 2 Himanshu Praveen Jain account of bogus purchases. In the cross objection, it has been submitted that ld.CIT(A) erred in confirming the addition of Rs. 3,39,578/- being 25% of the alleged non-genuine purchases.

3.

Brief facts of the case are that the assessee is engaged in the business of manufacturer of machineries. Pursuant to information from Sales tax department, that assessee has engaged into bogus purchases, assessment was reopened. In the assessment order, AO noted that assessee has purchased Rs. 13,58,313/- worth of goods from five parties, who were under list of bogus, accommodation entry provider. AO issued 133(6) notices to the parties, which returned un-served. AO asked the assessee to produce the said parties and also to produce documentary evidences of transactions of goods purchases from said parties. Assessee supplied purchase ledgers along with copy of bills from the said parties and bank statement containing payments to parties. AO proceeded to hold that these purchases are bogus and made 100% addition the same.

4.

Upon assessees appeal, ld.CIT(A) was of the opinion that assessee has purchased the material from grey market. Hence, he held that 25% disallowance served the end of justice.

5.

Against the above order, assessee and revenue are in appeal before the ITAT.

6.

I have heard both the parties and perused the records. I note that in this case information was received that assessee has engaged into bogus purchases. Despite notice, none of the parties responded. Assessee did not produce the supporting documents of purchases in the shape of lorry receipts, stock records etc. I note that nowhere in the orders of the authorities below, it is mentioned that assessee has submitted delivery challans and transport proof. However, ld. Counsel of the assessee in the cross objection has raised such a claim. This is dramatically opposite to the findings of the authorities below. Ld. Counsel of the assesse submitted that assessee

3 Himanshu Praveen Jain has already shown a gross profit of 20%. Hence, no disallowance is called for. I note that assessee is not engaged into trading operation. Assessee is in manufacturing business. Assessee has made purchases in the shape of bogus accommodation entry. In these circumstances, it can be inferred that assessee has made purchases from grey market. Such purchases benefit the assessee at the expense of exchequer. Hence, in the facts and circumstances of the case, I hold that 5% disallowance shall meet the end of justice. I direct accordingly.

7.

In the result, this appeal by the revenue is dismissed and cross objection by the assessee stands partly allowed.

Order pronounced in the open court on 16.03.2022

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