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

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ITA 145/MUM/2021Status: DisposedITAT Mumbai09 November 2021AY 2009-104 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 addition to 12.5% of the impugned purchases. The Tribunal found no infirmity in the CIT(A)'s estimation of profit at 12.5%, citing a Gujarat High Court judgment.

What were the facts?

The Assessing Officer (AO) reopened the assessee's case based on information that the assessee obtained bogus purchase bills. The assessee failed to prove the genuineness of purchases from 11 parties, leading the AO to treat them as bogus and make an addition of 25% of the purchase value.

What were the issues?

Whether the addition on account of bogus purchases should be restricted to 12.5% as decided by the CIT(A) or 25% as estimated by the AO, considering the assessee's failure to prove genuineness.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3),Section 145(3),Section 69C

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI

Before: SHRI PRAMOD KUMAR & SHRI RAVISH SOOD

For Respondent: Shri Milind Chavan, D.R
Hearing: 02/11/2021Pronounced: 09/11/2021

PAN No. AGGPK6284J (Revenue) (Assessee) Assessee by : None Revenue by : Shri Milind Chavan, D.R Date of Hearing : 02/11/2021 Date of pronouncement : 09/11/2021 ORDER PER RAVISH SOOD, J.M:

The present appeals filed by the revenue are directed against the order passed by the CIT(A)-34, Mumbai, dated 20.01.2020 for A.Y. 2009-10 and A.Y. 2010-11, which in turn arises from the respective orders passed by the A.O u/s 143(3) r.w.s 147 of the Act for the said respective years. As common issue is involved in the aforementioned appeals, therefore, we shall dispose off the same by way of a consolidated order. We shall first take up the appeal filed by the revenue for A.Y. 2009-10. The revenue has assailed the impugned order on the following grounds before us:

“(a) On the facts and in the circumstance of the case and law, the Ld. CIT(A) has erred in restricting the addition made by the AO amounting Rs.10,06,548 i.e. 25% of total purchase to 12.5% ignoring the fact that the action of the Assessing Officer was based on credible information received from the Maharashtra Sales Tax Department and that the assessee during the course of assessment proceedings, failed to prove the genuineness of the purchase transactions.

& 146/Mum/2021 A.Ys. 2009-10 & 2010-11 2 ITO-22(2)(1) Vs. Shri Mohibullah A.J. Khan

(b) On the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in estimating addition on account of bogus purchase to 12.5% of such purchases as against the estimation by the AO at 25% of bogus purchases without appreciating the fact that the assessee had failed to establish the genuineness of the alleged parties from whom purchases is claimed to have been made during the year. (c) On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in estimating addition on account of bogus purchase to 12.5% of such purchases as against the estimation by the AO at 25% of bogus purchases without appreciating the fact that the assessee could neither produce the delivery challans or the transport bills/invoices nor could produce the alleged parties from whom purchases is claimed to have been made during the year? (d) On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in estimating addition on account of bogus purchase to 12.5% of such purchases as against the estimation by the AO of 25% of bogus purchases without appreciating the fact that the Sales Tax Department as well as the DGIT (Inv.), Mumbai during the course of investigations found the alleged parties to be providing only accommodation/bogus purchase bills? (e) This case is filed because it is covered under exception provided in para 10(e) of the CBDT's Circular No.3 of 2018 dated 11.07.2018 as amended vide F.No 279/Misc.l42/2007-ITJ(Pt) dated 20.08.2018. (f) The appellant prays that the order of the CIT(A) on the above ground be reversed and that of the Assessing Officer be restored. (g) The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”

2.

Shorn of unnecessary details, on the basis of information received by the A.O from the DGIT(Inv.), Mumbai that the assessee as a beneficiary had obtained bogus purchase bills the case of the assessee was reopened u/s 147 of the Act.

3.

Observing, that the assessee had claimed to have made purchases from 11 tainted parties the A.O called upon him to substantiate the genuineness and veracity of the said impugned purchase transactions. As the assessee failed to discharge the onus that was cast upon him as regards proving the authenticity of the impugned purchase transactions to the satisfaction of the A.O, therefore, the latter dubbed the impugned purchases as bogus. Observing, that the assessee had purchased the goods in question not from the aforementioned hawala parties & 146/Mum/2021 A.Ys. 2009-10 & 2010-11 3 ITO-22(2)(1) Vs. Shri Mohibullah A.J. Khan but at a discounted value from the open/grey market the A.O after rejecting his books of accounts u/s 145(3) of the Act made an addition of 25% of the value of the impugned purchases u/s 69C of the Act.

4.

On appeal, the CIT(A) after drawing support from the judgment of the Hon’ble High Court of Gujarat in the case of Simit P. Sheth 356 ITR 461 (Guj), therein opined that in all fairness the addition in the hands of the assessee was liable to be restricted to the extent of 12.5% of the value of the impugned purchases.

5.

Aggrieved, the revenue has carried the matter in appeal before us. We have perused the order of the CIT(A) and after giving a thoughtful consideration find no infirmity in the view taken by him that the profit which the assessee would have made by the procuring the goods at a discounted value from the open/grey market could fairly be taken at 12.5% of the value of the impugned purchases. As observed by the CIT(A), the Hon’ble High Court of Gujarat in the case of Simit P. Sheth (supra) had after exhaustive deliberations restricted the addition qua the bogus purchases made by the assessee before them at 12.5% of the value of the impugned purchases. Before us, neither the ld. D.R could point out as to why the aforesaid estimation of the profit element @ 12.5% of the value of the impugned purchases by the CIT(A) was not to be accepted or was perverse, nor any material supporting the grievance of the revenue is discernible from the record. In the backdrop of the our aforesaid deliberations, we are of the considered view that the CIT(A) had in all fairness restricted the disallowance to 12.5% of the value of the impugned purchases. We, thus, finding no infirmity in the view taken by the CIT(A) uphold the same.

6.

The appeal of the revenue is dismissed. & 146/Mum/2021 A.Ys. 2009-10 & 2010-11 4 ITO-22(2)(1) Vs. Shri Mohibullah A.J. Khan

ITA No .146/Mum/2021 A.Y. 2010-11

7.

As the facts and the issue involved in the present appeal remains the same as were there before us in the appeal of the revenue for the immediately preceding year i.e ITA 145/Mum/2021 for A.Y. 2009-10, therefore, our order therein passed shall apply mutatis mutandis for the purpose of disposing off the present appeal. Accordingly, on the same terms, the appeal filed by the revenue for A.Y. 2010-11 in is dismissed.

8.

Resultantly, both the appeals of the revenue are dismissed.

Order pronounced in the open court on 09.11.2021

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