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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI M. BALAGANESH, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 21.01.2019 passed by the Commissioner of Income Tax (Appeals) -45, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2011- 12.
2. The assessee has raised the following grounds: - “1. a) The Learned Commissioner of Income Tax (Appeals) has erred in law and fact son records in confirming an addition of 15,61,217 by arbitrarily estimating the additional Gross profit @ 5% of Turnover as against 4.38% already offered to tax by the Appellant.
The appellant submit that it have been engaged in trading of the Leather articles, transported in hand carts, items of purchases are identifiable against the sales.
The Learned Commissioner of Income Tax (Appeals) has erred in law and facts on records in holding the reopening of the assessment as valid based on incorrect fact that no objection was taken by the appellant against the reopening of the assessment, whereas the appellant submit that the assessment was made exparte while sending the notice u/s 148 to a person not authorized by him at that time.
The Learned Commissioner of Income Tax (Appeals) has erred in law and facts on records in completing the assessment ills 144, whereas the statutory notice u/s 143(s) was not properly served and mandatory notice u/s 142(1) was received by the assesse on the date which happened to be date of compliance.
4. The Learned Commissioner of Income Tax (Appeals) has erred in law and facts on records in confirming an addition of Rs. 15,61,217 as calculated @ 5% of the purchases of Rs. 3,12,24,345/- merely following corollary that the appellant could have obtained the accommodation bills locally to save VAT without putting on records any material evidence that the appellant have obtained the bills from grey market, whereas the such purchases were duly reflected in Annexure J 1 of form 704 being VAT Audit report.
The appellant prays that the appeals prayed for be admitted and allowed and additions confirmed by the CIT (A) be deleted. The appellant craves leave to add, to alter or to amend any of the grounds of appeal at or before the time of hearing."
3. We have heard the argument advanced by the Ld. Representative of the parties and perused the record. It is pertinent to mention here that the present appeal bearing had already been adjudicated vide order dated 07.04.2021. Thereafter, the said appeal was recalled by virtue of order dated 28.01.2022 in M.A. No.293/Mum/2021. The order was recalled on the basis of this fact that the appeals filed by the revenue as well as assessee have been decided separately and the relief given therein caused ambiguity. We find that the issue in dispute has already been adjudicated in the appeal of the revenue bearing ITA. No.3094/Mum/2019 01.01.2021 for the A.Y. 2011-12 in which the addition of bogus purchase has been restricted to the extent of G.P. rate of bogus purchase at the same rate as that of the other genuine purchases. However, the relevant finding in the case bearing ITA. No.3094/Mum/2019 for the A.Y.2011-12 decided vide order dated 01.01.2021 is reproduced as under: - “6. We have heard the learned departmental representative and perused the records. We find that in this case the sales have not been doubted. It is settled law that when sales are not doubted, 100% disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from Hon'ble Jurisdictional High Court decision in the Nikunj Eximp Enterprises (in writ petition no 2860, order dt 18.6.2014). In this case the Hon'ble High Court has upheld hundred percent allowance for the purchases said to be bogus when sales are not doubted. However, the facts of the present case indicate that the assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non- payment of tax and others at the expense of the exchequer.
7. As regards the quantification of the profit element embedded in making of such bogus/unsubstantiated purchases by the assessee, we find that as held by Hon'ble Bombay High Court in its recent judgement in the case of Principle Commissioner of income tax vs. M Haji Adam & Co (in ITA number 1004 of 2016 dated 11/2/2019 in paragraph 8 there off), the addition in respect of bogus purchases is to be limited to the extent of bringing the gross profit rate on such purchases at the same rate as of other genuine purchases.
8. We respectfully following the aforesaid judgment of the Hon’ble High Court set aside the matter to the file of the assessing officer with the direction to restrict the addition as regards the bogus purchases by bringing the gross profit rate on such bogus purchases at the same rate as that of the other genuine purchases. Needless to add the assessee should be granted adequate opportunity of being heard.”
Since the issue has already been adjudicated while deciding the for the A.Y.2011-12 decided vide order dated 01.01.2021, therefore, the finding of the said case is quite applicable as mutatis mutandis in this case also. Accordingly, we allow the appeal of the assessee partly.
In the result, the appeal filed by the assessee is hereby partly allowed.