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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
(A.Y: 2009-10) ACIT – 3(1)(1) Vs. M/s Bhoir Dredging Room No. 607, 6th Co. Pvt Ltd., Floor, Aayakar Bhavan, 318, Maker Chambers MK Road, Mumbai – V, Nariman Point, 400020. Mumbai – 400021. �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAACB0473D Appellant .. Respondent Appellant by : Shri Y.P Trivedi. Adv Respondent by : Shri Sanjiv K. Jain Date of Hearing 17.11.2021 Date of Pronouncement 22.11.2021 आदेश / O R D E R
PER PAVAN KUMAR GADALE JM:
The revenue has filed the appeal against the order of the Commissioner of Income Tax (Appeals)-8 Mumbai, passed u/s 143(3) and 250 of the Income Tax Act, 1961. The revenue has raised the following grounds of appeal.
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting addition of Rs. 34,93,041/- on account of bogus purchases of the assessee to Rs. 4,36,630/-- without appreciating that the onus was on the assessee to establish the genuineness of such purchases and the assessee failed to discharge its onus.
M/s Bhoir Dredging Co. Pvt Ltd., Mumbai. - 2 -
2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not following the decision of Hori'ble Supreme Court in the case of N.K. Proteins Ltd. vs DCIT in SLP (Civil) No. 769 of 2017 dt. 16.01.2017 where the decision of Hon'ble Gujarat High Court in upholding the addition of 100% of such bogus purchases has been confirmed.
3. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of Assessing Officer be restored.
The appellant craves leave to amend, alter, delete or add grounds which may be necessary
The Brief facts of the case that the assessee company is engaged in the business of manufacturing and producing of sand, hiring of equipments and ships. The assessee has filed the return of income for the A.Y 2009-10 on 21.09.2009 with a total income of Rs. 2,73,23,596/-.The assessee has filed the revised return of income with the total income of Rs. 2,73,23,596/- and book profit u/s 115JB of the Act of Rs. 2,65,06,834/-. The case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act are issued and The assessment was completed u/s 143(1) of the Act vide order dated 23.11.2011 determining a total income of Rs. 2,76,73,443/- under normal provisions of income tax and book profit. Subsequently, the Assessing officer (A.O)
M/s Bhoir Dredging Co. Pvt Ltd., Mumbai. - 3 - has received information from the Sales Tax Department of Maharashtra that the assessee is a beneficiary of the accommodation entries provider and has obtained bogus purchase bills from 5 parties aggregating to Rs. 34,93,041/-.Therefore the A.O has reason to believe that there is a income escaping assessment and issued notice u/s 148 of the Act. The assessee has filed a letter on 08.04.2014 to treat the revised return of income filed on 30.09.2009 as in compliance to the notice issued u/s 148 of the Act.
The A.O has issued notice u/s 143(2) and 142(1) of the Act .The Ld. AR of the assessee appeared from time to time and furnished the details and the case was discussed. The A.O. has observed that the assessee has disclosed some purchases from these parties and claimed in the books as an expenditure and the A.O has called for the details to substantiate the claim of purchases as the revenue has received the information from sales tax department that the above parties have provided accommodation entries to the assessee without actual delivery of goods. Therefore to test check the genuineness of the transactions has called for the confirmation and the details. The A.O. considered the information and is of the opinion that the evidences of material filed could
M/s Bhoir Dredging Co. Pvt Ltd., Mumbai. - 4 - not substantiate the genuineness of the transactions. The A.O. has elaborately discussed the issue with respect to bogus purchases and made addition as unexplained expenditure u/s 69C of the Act and assessed the total income of Rs.3,11,64,480/- and passed the order u/s 143(3) r.w.s 147 of the Act dated 23.02.2015.
4..Aggrieved by the order, the assessee has filed an appeal before the CIT(A). The CIT(A) in the appellate proceedings considered the grounds of appeal, findings of the A.O in the scrutiny assessment, submissions of the assessee on the disputed issue. Finally the CIT(A) considered the judicial decisions of the Honble High Court and Honble Tribunal and restricted the addition to the extent of 12.5% of bogus purchases and partly allowed the appeal. The CIT(A) has observed at Para 7.2.8 & 7.2.9 of the order, which is read as under:
7.2.8 In view of the above, it is clear that it is a established fact beyond doubt that the appellant company has utilized accommodation entry from parties mentioned above, without actually receiving the goods. During the course of re- assessment proceeding, the fact of procurement of bills of suspicious dealer was communicated to the appellant company. The appellant company was asked to substantiate the genuineness of purchases made from such party. The assessee could not produce the Hawala parties nor was unable to substantiate its purchases from the claim of M/s Bhoir Dredging Co. Pvt Ltd., Mumbai. - 5 - suppliers who are already established hawala dealers by the Sales Tax Department and Investigation wing of the Income Tax Department. Accordingly the AO proceeded to complete the assessment considering the purchases made from such parties as bogus and disallowed the entire purchases from the said dealers and added it back to the total income. However, this is also a fact that the AO has accepted that purchases under reference have actually been made from grey market and bills from such suspicious hawala dealers have been utilised. The AO has also not questioned the sales claimed by the appellant. In such a situation, the various courts/tribunal have held that there cannot be total disallowance of purchase, rather the disallowance should be restricted to the benefit received by the appellant in term of VAT charge, transportation etc.
7.2.9 Now, / find that the AO has disallowed 100% of alleged bogus purchases of Rs. 34,93,041/-, which I restrict to 12.5% of alleged bogus purchases relying upon the case of CIT vs. Simit P. Sheth (2013) 356 ITR 451 (Guj. HC) and High Court of Bombay in the case of Pooja Paper Trading Co (P) Ltd (Supra) which, in my opinion, is just and fair in given circumstances to take care of any leakage of revenue. Hence, the disallowance in principle is upheld but restricted to 12.5% of the purchases from suspicious hawala dealers. Therefore these grounds of appeal are partly allowed.
5. Aggrieved by the CIT(A) ordere, the revenue has filed an appeal before the Honble Tribunal.
6. At the time of hearing, the Ld.DR submitted that the CIT(A) has erred in restricting the addition to 12.5% irrespective of facts that no proper information was filed in the Assessment proceedings. Contra the Ld.AR
M/s Bhoir Dredging Co. Pvt Ltd., Mumbai. - 6 - supported the order of CIT(A) and relied on the judicial decisions.
We heard the rival submissions and perused the material on record. The sole crux of the disputed issue as envisaged by the Ld.DR that the CIT(A) has restricted the addition to the extent of 12.5% of the bogus purchases considering profit element embedded. We found that the CIT(A) has dealt on the facts and considered the Hon’ble High Court decision and took a view. Further, We find the Jurisdictional Honble High Court in the case of Pooja Paper Trading Co. Vs. ITO, (104 taxmann.com 95) and Honble Gujarat High court in CIT Vs. Simit P Sheth (2013) (356 ITR 451) has upheld the disallowance @ 12.5% on such purchases.
We find that the Ld.CIT(A) took a reasonable view that the only profit percentage has to be added and estimated @ 12.5% of bogus purchases. The Ld.DR could not controvert the observations of the Ld. CIT(A) with any new cogent evidence and material but relied only on the A.O order. We are of the opinion that the CIT(A) dealt on the facts and considered the profit element in the bogus purchases and also the A.O has not disputed the sales. The Ld.CIT(A) has relied on the decisions of Hon’ble High Court and passed a reasoned order. Accordingly, we do
M/s Bhoir Dredging Co. Pvt Ltd., Mumbai. - 7 - not find any infirmity in the order of the CIT(A) and uphold the same and dismiss the grounds of appeal raised by the revenue.
In the result, the appeal filed by the revenue is dismissed.
Order pronounced in the open court on 22.11.2021.
Sd/- Sd/- (M BALAGANESH) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 22.11.2021 KRK, PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. संबं�धत आयकर आयु�त / The CIT(A) 3. 4. आयकर आयु�त(अपील) / Concerned CIT �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Mumbai 5. गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// ( Asst. Registrar)
ITAT, Mumbai