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Income Tax Appellate Tribunal, MUMBAI BENCH “H” MUMBAI
Before: SHRI PRAMOD KUMAR & SHRI RAVISH SOOD
ORDER PER RAVISH SOOD(JM): The present appeal filed by the revenue is directed against the order passed by the CIT(A)-12, Mumbai, dated 26.11.2019 which in turn arises from the order passed by the A.O u/s 143(3) r.w.s 147 of the Income Tax Act, 1961 (for short „Act‟), dated 29.02.2016 for A.Y. 2010-11. The revenue has assailed the impugned order on the following grounds before us:
“1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in restricting the addition at 13,130/- being 12.5% of the purchase out of addition made of Rs.1,05,035/- in the assessment order passed by AO u/s 143(3) r.w.s. 147 of the I.T, Act on 29/02/2016 on account of disallowance u/s. 69C of the l.T, Act, 1961 on the basis of information received from the office of DGlT(Inv), Mumbai in respect of assessee who were engaged in bogus purchase activity i.e. taking of hawala transaction as reported by DGlT(Inv), Mumbai.
2. On the facts arid in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the quantum addition ignoring that the information on account of bogus purchases was received from the office of DGlT (lnv), Mumbai in respect
2 ITO, Ward -6(3)(4) vs. M/s Khanna & Sawant Interiors Pvt. Ltd. of assessee who were engaged in bogus purchase activity i.e. taking of hawala transaction as reported by DGIT(lnv), Mumbai.
3. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in erred in failing to abide by the landmark decision of Hon‟ble Supreme Court in the case of N.K. Proteins Ltd. dated 16.01.2017 wherein the hon‟ble Supreme Court has confirmed the addition of 100% of the bogus/unexplained purchases.
Though the tax effect in this case is Rs.30,329/- which is less than the prescribed monetary limit contained in the Board Circular 17/2019 dated 08/08/2019, appeal is filed because it is covered by exception mentioned in para 19(e) of the CBDT Circular No.3/2018 vide No.279/Misc./142/2007-lTJ(Pt.) which is effective as on date.
5. The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the AO be restored.
6. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”
Briefly stated, the assessee company which is engaged in the business of interior designing and contract work had filed its original return of income for A.Y. 2010-11 on 13.10.2010, declaring a total income of Rs.48,56,973/-. The return of income filed by the assessee was initially processed as such u/s 143(1) of the Act. Subsequently, 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 from certain hawala operators, its case was reopened u/s 147 of the Act.
During the course of the assessment proceedings it was observed by the A.O that the assessee had claimed to have made impugned purchases aggregating to Rs.1,05,035/- from the following three tainted parties:
Sr. No. Name of the accommodation entry providers Amount 1. Parshva & Co. Rs.48,521/- 2. Hindustan Corporation Rs.20,759/- 3. Span Enterprises Rs.35,755/- Total Rs.1,05,035/-
3 ITO, Ward -6(3)(4) vs. M/s Khanna & Sawant Interiors Pvt. Ltd.
On being queried as to why the aforesaid impugned purchases may not be disallowed, the assessee placed on record copy of the bank statement, purchase register, sales register, ledger accounts of the aforesaid parties in question as appearing in its books of accounts. However, it was observed by the A.O that the asessee had failed to substantiate the authenticity of the impugned purchases on the basis of clinching documentary evidence i.e tax invoices, transport receipts, octroi receipts, godown receipts, toll receipts, insurance receipts, dispatch vouchers and copy of receipts of loading and unloading charges. Observing, that the genuineness and veracity of the impugned purchases were not open for verification, the A.O disallowed the entire amount of the aforesaid purchases of Rs.1,05,035/- by dubbing the same as an unexplained expenditure u/s 69C of the Act. After, inter alia, making the aforesaid addition/disallowance the A.O vide his order passed u/s 143(3) r.w.s 147, dated 29.02.2016 assessed the income of the assessee company at Rs.50,66,350/-.
4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). It was observed by the CIT(A) that though the assessee had placed on record certain documentary evidence to substantiate the authenticity of the purchase transactions in question, however, the A.O not being satisfied with the same had held the entire amount of purchases as bogus. Although, the CIT(A) concurred with the view taken by the A.O that the genuineness of the impugned purchase transactions could not be proved to the hilt by the assessee, however, in the totality of the facts therein involved he in all fairness restricted the addition to 12.5% of the value of the alleged bogus purchases. Accordingly, the CIT(A) sustain the addition to the extent of Rs.13,130/- (12.5% of Rs.1,05,035/-).
The revenue being aggrieved with the order passed by the CIT(A) has carried the matter in appeal before us. As the assessee respondent despite having been intimated about the hearing of the appeal had failed to put up an appearance before us, therefore, we are constrained to proceed with the matter
4 ITO, Ward -6(3)(4) vs. M/s Khanna & Sawant Interiors Pvt. Ltd. as per Rule 25 of the Appellate Tribunal Rules, 1963 and therein dispose off the appeal after hearing the appellant revenue and perusing the orders of the lower authorities.
The ld. Departmental Representative (for short „D.R‟) relied on the assessment order.
We have given a thoughtful consideration and are unable to persuade ourselves to subscribe to the contentions advanced by the ld. D.R. As observed by the CIT(A), and rightly so, the assessee had failed to prove the genuineness of the purchases that were claimed to have been made from the aforementioned three tainted parties to the satisfaction of the A.O. However, we cannot remain oblivious of the fact that the assessee had in the course of the assessment proceedings placed on record sufficient material which evidenced that the goods/material in question were actually purchased by him. On a perusal of the assessment order, we find, that though it is a matter of fact borne from the record that the assessee had in the course of the assessment proceedings filed copies of purchase invoices, ledger accounts of parties, stock register and also the bank statement which evidenced the payments made towards the purchases in question, but for the failure on its part to support the genuineness of the impugned purchases on the basis of certain specific documentary evidence the A.O had held the same to be bogus. In our considered view, though the insufficiency of the supporting documentary evidence to substantiate the authenticity of the purchase transactions had undoubtedly cast doubts as regards the genuineness of the purchase transactions in question, but the fact that the goods/material in question had actually been procured and utilized by the assessee in the normal course of its business had not been doubted much the less dislodged by the A.O. Backed by the aforesaid facts, we concur with the view taken by the CIT(A) that the addition qua the purchases in question was liable to be restricted only to the extent of the profit element which the assessee
5 ITO, Ward -6(3)(4) vs. M/s Khanna & Sawant Interiors Pvt. Ltd. would have made by procuring the goods in question not from the aforesaid hawala dealers, but at a discounted value from the open/grey market as against that booked in its books of accounts. Insofar the quantification of the aforesaid profit element @ 12.5% of the value of the impugned purchases is concerned, we are of the considered view that the same had fairly been adopted by the CIT(A). Our aforesaid view is fortified by the judgment of the Hon‟ble High Court of Gujarat in the case of CIT Vs. Simit P. Sheth (2013) 356 ITR 451 (Guj). Accordingly, finding no infirmity in the view taken by the CIT(A), we uphold his order.
Resultantly, the appeal filed by the revenue is dismissed.
Order pronounced in the open court on 17.09.2021