ITO - 22(2)(1), MUMBAI vs. SHRI MOHIBULLAH A J KHAN, MUMBAI

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ITA 147/MUM/2021Status: DisposedITAT Mumbai10 November 2021AY 2011-123 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to restrict the profit element on tainted purchases to 12.5%. This was based on consistent practice of the Tribunal in similar cases and the fact that the assessee did not appeal the CIT(A)'s order.

What were the facts?

The Assessing Officer (AO) estimated a 25% profit element on purchases made from four 'tainted dealers' and made an addition under Section 69C. The Commissioner of Income Tax (Appeals) reduced this profit element to 12.5%. The Revenue appealed this reduction.

What were the issues?

Whether the profit element embedded in genuine purchases from tainted dealers should be taxed at 25% as estimated by the AO or 12.5% as restricted by the CIT(A).

Which sections of the Income-tax Act were involved?

Section 69C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: SHRI M. BALAGANESH, AM & SHRI PAVAN KUMAR GADALE, JM Shri Mohibullah A. J. Khan

For Appellant: Shri Suresh Parisamy
Hearing: 10.11.2021Pronounced: 10.11.2021

O R D E R Per M. Balaganesh, AM:

This appeal by the Revenue is directed against the order of the learned Commissioner of Income Tax (Appeals)-34, Mumbai (‘ld.CIT(A) for short) dated 20.01.2020 and pertains to the assessment year (A.Y.) 2011-12.

2.

Though the Revenue has raised several grounds before us, the only effective issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in restricting the profit element embedded in the value in genuine purchases at 12.5% in the facts and circumstances of the instant case as against 25% estimated by the ld. Assessing Officer (ld. A.O.).

3.

None appeared on behalf of the assessee. We have heard the ld. Departmental Representative (ld. DR for short) and perused the material available on record. We find that the assessee is engaged in the business of manufacture in all kinds of M.S. and S.S. Washers. The return of income for the A.Y. 2011-12 was filed by the assessee on ITO vs. Shri Mohibullah A. J. Khan 30.09.2011, declaring the total income of Rs.6,16,210/-. It is not in dispute that the assessee made certain purchases from four parties, totaling to Rs.69,58,365/- whose names appear to be tainted dealers as per the website of Sales Tax Department, Government of Maharashtra. Pursuant to passing of such information to the Investigation Wing of the Income Tax Department, the assessment for the assessee was reopened u/s.147 of the Act after due recording of reasons thereon. In the assessment, the ld. A.O. observed that the consumption of the goods purchased from the four tainted parties cannot be doubted and, hence, only the profit element embedded in value of such tainted purchases could be brought to tax. The ld. A.O. estimated the said profit element at 25% and made the addition u/s.69C of the Act in the assessment. This profit element was reduced to 12.5% by the ld. CIT(A) by following the order of his predecessor in assessee’s own case for A.Y. 2009-10.

4.

Against this order of the ld. CIT(A), only the Revenue is in appeal before us.

5.

We find that this Tribunal has been consistently estimating the profit element in respect of bogus purchases at 12.5% depending upon the nature of the business the assessee is engaged in. Since no appeal has been preferred by the assessee before us, we have no hesitation in upholding the order of the ld. CIT(A) in estimation of profit at 12.5%. Accordingly, the grounds raised by the Revenue are dismissed.

6.

In the result, the appeal of the Revenue is dismissed.

Order pronounced in the open court on 10.11.2021.

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