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Facts
The Revenue challenged the CIT(A)'s decision to restrict the addition for bogus purchases to 2.5% for Assessment Years 2014-15 and 2015-16, arguing that the purchases were entirely bogus and no actual goods were delivered. The Revenue sought to uphold the AO's addition of 12.5%, citing a Supreme Court decision.
Held
The Tribunal dismissed the Revenue's appeals, confirming that the addition on account of alleged bogus purchases should be restricted to 2.5%. This decision was based on prior ITAT orders for the assessee in other assessment years, which noted that the malpractices were primarily to save sales tax and that the industry's profit margin was about 2.5%.
Key Issues
Whether the addition for bogus purchases should be restricted to 2.5% as determined by the CIT(A) or maintained at 12.5% as initially made by the Assessing Officer, considering previous ITAT orders for the assessee on the same issue.
Sections Cited
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Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI NARENDRA KUMAR CHOUDHRY & SHRI OMKARESHWAR CHIDARA
These appeals by the Revenue are directed against two separate orders both dated 29.01.2024 passed by the National Faceless Appeal Centre (NFAC), New Delhi [in short ‘the Ld. CIT(A)’].
Arudha Traders Private Limited 2 Arudha Traders Private Limited 1441 & 1440/MUM/2024 & 1440
The Revenue filed the above captioned appeals with Revenue filed the above captioned appeals with Revenue filed the above captioned appeals with the following grounds of appeal following grounds of appeal for the Assessment Years 2014 Assessment Years 2014-15 and 2015-16. i. Whether on the facts & circumstances of the case and in law, the i. Whether on the facts & circumstances of the case and in law, the i. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) is justified in restricting the addition on account of bogus Ld. CIT(A) is justified in restricting the addition on account of bogus Ld. CIT(A) is justified in restricting the addition on account of bogus purchases to the extent of 2.5% of such purchases as against 12.5%, purchases to the extent of 2.5% of such purchases as against 12.5%, purchases to the extent of 2.5% of such purchases as against 12.5%, as made by the AO, ignoring the fact that the One World Group and the AO, ignoring the fact that the One World Group and the AO, ignoring the fact that the One World Group and Kapadia Group of entities are involved in bogus sale/purchase Kapadia Group of entities are involved in bogus sale/purchase Kapadia Group of entities are involved in bogus sale/purchase transactions without any actual delivery of goods and therefore, the transactions without any actual delivery of goods and therefore, the transactions without any actual delivery of goods and therefore, the purchases, claimed by the assessee company to have made from the purchases, claimed by the assessee company to have made from the purchases, claimed by the assessee company to have made from the entities of the abovementioned groups, are bogus in nature?. ties of the abovementioned groups, are bogus in nature?. ties of the abovementioned groups, are bogus in nature?. ii. "Whether on the facts and circumstances of the case in law the Whether on the facts and circumstances of the case in law the Whether on the facts and circumstances of the case in law the Ld.CIT(A) is justified in restricting the addition on account of bogus Ld.CIT(A) is justified in restricting the addition on account of bogus Ld.CIT(A) is justified in restricting the addition on account of bogus purchases to the extent of 2.5% of such purchases as against 12.5%, purchases to the extent of 2.5% of such purchases as against 12.5%, purchases to the extent of 2.5% of such purchases as against 12.5%, as made by the AO, completely ignoring the judicial rul as made by the AO, completely ignoring the judicial ruling given by ing given by the jurisdictional Hon’ble ITAT in this regard. the jurisdictional Hon’ble ITAT in this regard.
3. Whether on the facts and in circumstances of the case and in law, Whether on the facts and in circumstances of the case and in law, Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A)/NFAC has erred in not relying on Hon’ble Supreme the Ld. CIT(A)/NFAC has erred in not relying on Hon’ble Supreme the Ld. CIT(A)/NFAC has erred in not relying on Hon’ble Supreme Court Decision in the case of N. K Proteins Ltd. Vs. DCIT(201 Court Decision in the case of N. K Proteins Ltd. Vs. DCIT(201 Court Decision in the case of N. K Proteins Ltd. Vs. DCIT(2017) 292 CTR 334 (SC).
3. The main issue issue involved in this case is whether the addition involved in this case is whether the addition on account of bogus purchases should be made @ 12.5% or 2.5%. on account of bogus purchases should be made @ 12.5% or 2.5%. on account of bogus purchases should be made @ 12.5% or 2.5%. The Learned DR relied on the Assessment Order and argued that The Learned DR relied on the Assessment Order and argued that The Learned DR relied on the Assessment Order and argued that 12.5% of the bogus purchases should be confirm 12.5% of the bogus purchases should be confirmed.
4. Per contra, the Learned AR of the appellant has submitted the Learned AR of the appellant has submitted the Learned AR of the appellant has submitted that the issue was covered in their favour for the Assessment Years that the issue was covered in their favour for the Assessment Years that the issue was covered in their favour for the Assessment Years 2016-17 17 and and 2018 2018-19. The ITAT vide vide orders orders ITA ITA No. No. 1439/Mum/2024, and 1443/Mum/2024 dated 1439/Mum/2024, and 1443/Mum/2024 dated 1439/Mum/2024, ITA No. 1438 and 1443/Mum/2024 dated 22.8.2024 in their ow in their own case held that the AO should restrict the n case held that the AO should restrict the addition to 2.5% of the alleged bogus purchases in the peculiar to 2.5% of the alleged bogus purchases in the peculiar to 2.5% of the alleged bogus purchases in the peculiar facts and circumstances of the case mentioned in the Assessment facts and circumstances of the case mentioned in the Assessment facts and circumstances of the case mentioned in the Assessment
Arudha Traders Private Limited 3 Arudha Traders Private Limited 1441 & 1440/MUM/2024 & 1440 order. The ITAT has directed the AO to restrict the order. The ITAT has directed the AO to restrict the addition addition to 2.5% of the bogus purchases because the Learned AO himself recorded rchases because the Learned AO himself recorded rchases because the Learned AO himself recorded that the malpractices malpractices of the bogus purchases was only to save the of the bogus purchases was only to save the 10% of the sales tax and the profit margin in the indust 10% of the sales tax and the profit margin in the indust 10% of the sales tax and the profit margin in the industry is approximately 2.5%. The same facts are mentioned in the order of approximately 2.5%. The same facts are mentioned in the order of approximately 2.5%. The same facts are mentioned in the order of Ld. CIT(A) also.
As the issue is squarely covered in favour of the assessee and As the issue is squarely covered in favour of the assessee and As the issue is squarely covered in favour of the assessee and other assessment years, respectfully following the orders of the other assessment years, respectfully following the orders of the other assessment years, respectfully following the orders of the ITAT, the Revenue appeal is dismissed by holding the addition of ITAT, the Revenue appeal is dismissed by holding the addition of ITAT, the Revenue appeal is dismissed by holding the addition of alleged bogus purchases is to be restricted at 2.5% instea alleged bogus purchases is to be restricted at 2.5% instea alleged bogus purchases is to be restricted at 2.5% instead of 12.5% mentioned in the assessment order. mentioned in the assessment order.
Both the above appeal Both the above appeals of the Revenue of the Revenue in and 1440/Mum/2024 a 1441/Mum/2024 and 1440/Mum/2024 are dismissed dismissed.
Order pronounced in the open Court on Order pronounced in the open Court on 07/01/2025 /01/2025.