ITO 27(1)(4), MUMBAI vs. SHRI. DILIP G KACHHARA, MUMBAI

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ITA 494/MUM/2020Status: DisposedITAT Mumbai24 September 2021AY 2009-103 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 held that while the assessee failed to prove the genuineness of the purchases, the AO's estimation of profit margin at 25% was excessive. The CIT(A)'s reduction to 10% was found to be reasonable and upheld.

What were the facts?

The assessee, engaged in building material trading, had its assessment reopened based on information about obtaining accommodation entries from a hawala operator. The assessee failed to respond to notices, leading to a best judgment assessment where the AO added 25% of bogus purchases as income.

What were the issues?

The primary issue was the reasonableness of the profit margin estimated by the AO on bogus purchases, and whether the CIT(A) erred in reducing it.

Which sections of the Income-tax Act were involved?

Section 148,Section 142(1),Section 144,Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Hearing: 01/07/2021Pronounced: 24/09/2021

ORDER PER VIKAS AWASTHY, J.M: This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-24, Mumbai [hereinafter referred to as ‘the CIT(A)’] ' dated 23.10.2019 for the Assessment Year (AY) 2009-10. 2. The brief facts of the case as emanating from records are: The assessee is engaged in trading of building material. On the basis of information received आअसं. 494/मुं/2020 (िन.व.2009-10) (A.Y. 2009-10) from Investigation wing of the Department, the assessment for AY 2009-10 in the case of assessee was re-opened. As per the information received, the assessee had obtained accommodation entries amounting to Rs. 2,26,019/- from M/s Mahadeshpura Enterprises, a hawala operator, declared by the Sales Tax Department, Government of Maharashtra. The Assessing Officer (AO) had issued notice under section 148 and thereafter notice under section 142(1) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] to the assessee. The assessee did not respond to the said notices, hence, the AO completed the assessment under section 144 of the Act. During assessment proceeding, the assessee failed to discharge its onus in proving genuineness of the dealer and the purchases made from the said dealer. The AO estimated GP @ 25% on bogus purchases and made addition of Rs. 80,700/-. Against the assessment order dated 19.03.2015 passed under section 143(3) read with section 147 of the Act. The assessee filed appeal before the CIT(A). The CIT(A) after examining the facts granted part relief to the assessee by estimating GP @ 10% on bogus purchases. Now, the Revenue is in appeal against the order of CIT(A).

3.

Sh. Sanjay J. Sethi representing the Department vehemently supported the assessment order and prayed for reversing the findings of First Appellate Authority. The ld. Departmental Representative (DR) submitted that the CIT(A) has failed to appreciate the fact that the assessee has failed to substantiate genuineness of the dealers and the purchases made from the said dealer. The AO in a fair and reasonable manner has estimated suppressed profit margin on bogus purchases at the rate of 25%. The CIT(A) has reduced it to 10%.

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