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Income Tax Appellate Tribunal, “SMC” BENCH,
Before: SHRI M. BALAGANESH, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The revenue has filed the above mentioned appeals against the different order passed by the Commissioner of Income Tax (Appeals) -03, Thane [hereinafter referred to as the “CIT(A)”] relevant to the A.Ys.2009- 10 to 2011-12.
The revenue has filed the present appeal against the order dated 25.02.2020 passed by the CIT(A)-03, Thane [hereinafter referred to as the “CIT(A)”] relevant to the A.Y. 2009-10.
The revenue has raised the following grounds: -
to 422/Mum/2021 A.Ys.2009-10 to 2011-12 "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A}-3, Thane erred in deleting the addition of Rs.3,63,304/- out of the total addition of Rs.4,84,406/- made on account of bogus purchases, despite holding that the purchases were not genuine and the assessee failed to prove genuineness of the transactions.
2. On the facts and in the circumstances of the case and in law, Ld. CIT(A)-3, Thane erred in deleting the above addition despite the fact that the assessee failed to discharge his onus of proving the purchases.
3. The appellant prays that the order of the Ld. CIT(A)-3, Thane, may be set-aside and that of the Assessing Officer be restored.
4. The appellant craves leave to add, amend or alter or alter any ground/grounds, which may be necessary.”
4. The brief facts of the case are that the AO received information from the higher authorities that the assessee has received the bogus purchases bills from the entry providers. On the basis of said information, the AO has reason to believe that the income of the assessee for the assessment under consideration has escaped assessment within the provision of 147 of the Act. After recording the reason, the notice u/s 148 of the Act was issued and served upon the assessee. The assessee filed the return of income on 30.09.2009 which he had already filed declaring the total income to the tune of Rs.1,94,960/-. Subsequently, notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. Thereafter, the notice u/s 133(6) to 422/Mum/2021 A.Ys.2009-10 to 2011-12 were issued but nobody responded. The assessee has taken the bogus purchase entry from the following four parties: - S. Name MVAT No. Amount No. 1 Pioneer Trading Corporation 27430617262V 90,740/- 2 Deep Enterprises 27750595164V 92,768/- 3 Hiten Enterprises 27880265244V 89,778/- 4 Krish Corporation 27890606533V 2,11,120/- Since no explanation came from the assessee and no parties appeared, therefore, the AO raised the addition to the extent of 100% of Rs.4,84,406/- . The total income of the assessee was assessed to the tune of Rs.6,79,366/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who restricted the addition to the extent of 25% of the bogus purchase but the revenue was not satisfied, therefore, the revenue has filed the present appeal before us.
ISSUE NOS. 1 TO 3
We have heard the argument advanced by the Ld. Represented of the parties and perused the record. Before going further, we deem it necessary to advert the finding of the CIT(A) on these issues: - “5. I have considered the facts of the case and the submission of the appellant. As the relevant purchases have been debited to the P&L Account and claimed as deduction in computing the profits of the business chargeable to tax, the onus was on the appellant to prove the genuineness of the purchases with satisfactory evidences. During the course of assessment proceedings the appellant neither attended nor to 422/Mum/2021 A.Ys.2009-10 to 2011-12 filed any written submissions to substantiate the purchases made from the alleged hawala parties. However, during the course of appellate proceedings the appellant has produced the copies of ledger accounts, purchase bills, bank statements, etc, to substantiate his claim. It is noted that the AO was in possession of information received from the Sales Tax Department, indicating strongly that the suppliers concerned were only providing accommodation entries and were not carrying out any real business. Thus, the onus that was cast on the appellant was of a greater degree to prove the genuineness of the parties as well as of these purchases. Under these circumstances the claim of the appellant that the said purchases are genuine cannot be accepted in totality.
5.1. There cannot be any dispute about the well settled legal proposition that tax can be levied only on real income. It is elementary rule of accountancy as well as of taxation laws that the profit from business cannot be ascertained without deducting the cost of purchase from sales, otherwise it would amount to levy of income tax on gross receipts or sales.
5.2 Disallowance @ 25% out of Bogus purchases was held as reasonable in the case of Vijay Proteins Ltd. by the Hon'ble Gujarat High Court, in view of the fact that the savings occurred to the suppliers on account of sales tax, duties and Income-tax, by buying the goods from grey market at lower rates and booking the purchases at normal rate, the assessee got the benefit of this proportion. It is pertinent to mention here that the Hon’ble Supreme Court, vide order dated 6.4.2015, dismissed the SLP filed by the assessee and confirmed the finding of the Hon'ble Gujarat HC in the case of Vijay Protein and to 422/Mum/2021 A.Ys.2009-10 to 2011-12 other decisions of the Gujarat HC in the case of Sanjay Oilcake Industries Vs. CIT (2009) 316 ITR 274 and N.K Industries Ltd. Vs. DCIT. 5.3 Considering the facts of case and in view of various decisions as discussed above, it is held that the appellant has made sales so the purchases cannot be totally bogus. Therefore 25% of the bogus purchases, ie. Rs.1,21,102/-, out of total purchases of Rs. 4,84,406/may be added to the income of the appellant. Accordingly, the disallowance of Rs. 1,21,102/- confirmed and balance amount of Rs.3,63,304/- is deleted and the grounds of appeal raised as above are partly allowed.”
6. On appraisal of the above mentioned finding, we noticed that the CIT(A) has restricted the addition to the extent of 25% of the bogus purchase on the basis of the decision of Hon’ble Gujarat High Court in the case of Vijay Proteins Ltd. And Sanjay Oilcake Industries Vs. CIT (2009) 316 ITR 274. It is specifically held that the 100% of the bogus purchase is not liable to be added. Now, the issue has been decided by various authorities in which it has been held that 100% addition of the bogus purchase is not justifiable. No law has been produced before us to which it can be assumed that the 100% addition of bogus purchase is justifiable. The CIT(A) has restricted the addition to the extent of 25% of the bogus purchase on the basis of the decision mentioned in the order which nowhere seems unjustifiable. Taking into account of all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with