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Income Tax Appellate Tribunal, VIRTUAL COURT
Before: SHRI C.N. PRASAD, HONBLE
O R D E R PER C.N. PRASAD (JM) 1. These appeals are filed by the revenue against different orders of the Learned Commissioner of Income Tax (Appeals)–33, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 22.07.2020 for the A.Y. 2009-10 and 2010-11, in restricting the disallowance to 25% of purchases as against the 100% of the purchases disallowed as non-genuine/bogus by the Assessing Officer.
2 & 332/MUM/2021 (A.Ys: 2009-10 & 2010-11) Nilesh K. Prikh 2. Briefly stated the facts are that, assessee an individual, filed return of income on 10.09.2009 and 08.07.2010 declaring income of ₹.3,74,269/- and ₹.3,64,580/- for the A.Y.2009-10 and A.Y. 2010-11 respectively, and the returns were processed u/s. 143(1) of the Act. Subsequently, the returns were reopened by issuing notice u/s.148 of the Act after duly recording reasons for reopening being escapement of income on account of accommodation bills / fictious bills. In the reassessment proceedings, the assessee was required to prove the genuineness of the purchases made from various parties as mentioned the Assessment Order. In response assessee did not make any compliance to notices.
The Assessing Officer treated the purchases as non-genuine and he was of the opinion that assessee had obtained only accommodation entries without there being any transportation of materials and the assessee might have made purchases in the gray market. Assessing Officer observed that the notices issued u/s. 133(6) of the Act to the parties are returned unserved and the assessee has not produced the parties before the Assessing Officer. It is the finding of the Assessing Officer that the assessee failed to furnish transportation bills and even
3 & 332/MUM/2021 (A.Ys: 2009-10 & 2010-11) Nilesh K. Prikh failed to furnish any delivery challans to substantiate the purchases. Therefore, Assessing Officer treated entire alleged bogus purchases of ₹.3,00,156/- and ₹.11,30,614/- for the A.Y.2009-10 and A.Y. 2010-11 respectively as non-genuine. On appeal the Ld.CIT(A) considering the facts of the case and submissions of the assessee restricted the disallowance to 25% of purchases. Against this order revenue is in appeal.
Inspite of issue of notice none appeared on behalf of assessee nor any adjournment was sought. Therefore, I proceed to dispose of these appeals on merits on hearing Ld.DR.
Ld. DR vehemently supported the orders of the Assessing Officer.
6. Heard Ld.DR, perused the orders of the authorities below. On a perusal of the order of the Ld.CIT(A), I find that the Ld.CIT(A) considered this aspect of the matter elaborately with reference to the submissions of the assessee and the averments in the Assessment Order and restricted the disallowance to 25% of purchases. While holding so, the Ld.CIT(A) observed as under: - 4 & 332/MUM/2021 (A.Ys: 2009-10 & 2010-11) Nilesh K. Prikh “A.Y: 2009-10 5.2 So far the addition for bogus purchases is concerned, I am of the view that the appellant has failed to prove the genuineness of purchases with necessary documents and by producing the parties before the AO. The enquiries conducted against the 5 alleged parties u/s 133(6) and the enquiries conducted by the Sales Tax Department clearly indicate that the aforesaid five parties have only issued bills without suppling any goods. Therefore, it is clearly a case of bogus purchase. However, making addition @ 100% of bogus purchase is not justified in the present case as it has not been proved that the appellant has not purchased materials from any other sources and as a result the entire amount of payments/ purchases represent his profit element. In absence of such findings, I am of the view that only profit element embedded in the bogus purchases can be disallowed. Considering the entirety of facts and circumstances of the case, it is estimated that addition of profit element @ 25 % of total bogus purchases will be most appropriate and fair addition in this case. In view of above, the addition of Rs. 75,039/- being 25% of bogus purchases of Rs. 3,00,156/- is sustained and balance addition of Rs.2,25,117/- being 75 % of bogus purchase is hereby deleted. The appellant has not filed any proof related to deduction under chapter VIA and hence the findings of the AO is confirmed. Thus, the grounds are partially allowed.
6. In the result, the appeal for AY 2009-10 is partly allowed A.Y. 2010-11 5.2 So far the addition for bogus purchases is concerned, I am of the view that the appellant has failed to prove the genuineness of purchases with necessary documents and by producing the parties before the AO. The enquiries conducted against the 5 alleged parties u/s 133(6) and the enquiries conducted by the Sales Tax Department clearly indicate that the aforesaid five parties have only issued bills without suppling any goods. Therefore, it is clearly a case of bogus purchase. However, making addition @ 100% of bogus purchase is not justified in the present case as it has not been proved that the appellant has not purchased materials from any other sources and as a result the entire amount of payments/ purchases represent his profit element. In absence of such findings, I am of the view that only profit element embedded in the bogus purchases can be disallowed. Considering the entirety of facts and circumstances of 5 & 332/MUM/2021 (A.Ys: 2009-10 & 2010-11) Nilesh K. Prikh the case, it is estimated that addition of profit element @ 25 % of total bogus purchases will be most appropriate and fair addition in this case. In view of above, the addition of Rs. 2,82,654/- being 25% of bogus purchases of Rs. 11,30,614/- is sustained and balance addition of Rs.8,47,960/- being 75 % of bogus purchase is hereby deleted. The appellant has not filed any proof related to deduction under chapter VIA and hence the findings of the AO is confirmed. Thus, the grounds are partially allowed.
In the result, the appeal for AY 2010-11 is partly allowed”
On a careful perusal of the order of the Ld.CIT(A) and the reasons given therein, I do not find any infirmity in the order passed by the Ld.CIT(A) in restricting the addition to 25% of purchases as against 100% of the purchases disallowance made by the Assessing Officer in both these assessment years under consideration. Grounds raised by the revenue are dismissed.
In the result, appeals of the Revenue are dismissed.
Order pronounced in the virtual court on 09.11.2021.