ITO 22 (1)(6), MUMBAI vs. AJAY GAJANAN RAUT, MUMBAI

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ITA 116/MUM/2020Status: DisposedITAT Mumbai26 August 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 held that while the assessee failed to prove the genuineness of purchases, a 100% disallowance was unsustainable as the sales turnover was accepted. The profit element embedded in such transactions can be brought to tax. Therefore, the CIT(A)'s restriction of disallowance to 25% was upheld.

What were the facts?

The Revenue appealed against the CIT(A)'s order which restricted the disallowance of bogus purchases to 25%. The assessee had obtained accommodation entries amounting to Rs. 40,73,175/- from hawala operators and failed to furnish documentary evidence to prove the genuineness of the dealers and purchases.

What were the issues?

Whether the entire amount of alleged bogus purchases should be disallowed when the sales turnover is accepted, or only the profit element embedded in such transactions.

Which sections of the Income-tax Act were involved?

Section 147

AI-generated summary — verify with the full judgment below

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

Hearing: 16/06/2021Pronounced: 26/08/2021

ORDER PER VIKAS AWASTHY, J.M: This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-33, Mumbai [hereinafter referred to as ‘the CIT(A)’] dated 15.10.2019 for the Assessment Year (AY) 2009-10. 2. The brief facts of the case as emanating from records are: The assessee is engaged in the business of trading. The assessment for AY 2009-10 in the

1.

आअसं. 116/मुं/2020 (िन.व.2009-10) (A.Y.2009-10) case of assessee was re-opened on the basis of information received from DGIT(Investigations), Mumbai. As per the information, assessee had obtained accommodation entries amounting to Rs. 40,73,175/- from hawala operators. During the course of assessment proceedings, the assessee failed to furnish documentary evidence to prove genuineness of the dealers and the purchases made from them. Consequently, the Assessing Officer (AO) made addition on entire alleged bogus purchases. Aggrieved by the assessment order dated 20.03.2015 passed under section 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). The assessee filed appeal before the CIT(A) assailing re-opening of assessment, as well as, addition on account of bogus purchases. The CIT(A) dismissed the ground raised by the assessee challenging validity of re-opening. On merits of the addition, the CIT(A) upheld the findings of AO to the extent of assessee’s involvement in obtaining bogus purchase bills, however, the CIT(A) allowed part relief to the assessee by restricting disallowance on bogus purchases to 25%. The Revenue is in appeal against the relief granted by the CIT(A).

3. Sh. Sanjay J. Sethi representing the Department submitted that the assessee has indulged in procuring bogus purchase bills from declared hawala operator. During assessment proceedings, the assessee could neither produce the dealers nor any confirmations from the said dealers were filed. No document in the form of Lorry receipt, Octry receipt, stock register, etc. was produced by the assessee to prove trail of goods. The ld. Departmental Representative (DR) vehemently supported the findings of AO and prayed for upholding the same. In support of his submissions to make 100% disallowance आअसं. 116/मुं/2020 (िन.व.2009-10) (A.Y.2009-10) of bogus purchases, the ld. DR relied on the decision rendered in the case of N.K. Proteins Ltd. v/s DCIT [84 taxmann.com 195].

4.

Submissions made by ld. DR heard, orders of the authorities below examined. Undisputedly, the assessee failed to discharge his onus in proving genuineness of the dealers and the purchases made from them. At the same time, it is observed that the sales turnover declared by the assessee has been accepted by the AO. Without purchases, there cannot be sales, hence, entire alleged bogus purchases cannot be disallowed. It is the profit element embedded in such transactions that can be brought to tax (Re: PCIT vs. Paramshakti Distributors Pvt. Ltd. in Income Tax Appeal No. 413 of 2017 decided on 15.07.2019). Hence, 100% disallowance made by the AO is unsustainable. The CIT(A) after considering the entire facts has restricted the disallowance to 25% of alleged bogus purchases. I see no reason to interfere with the impugned order, ergo, the impugned order is upheld and appeal of the Revenue is dismissed. Order pronounced in the open court on Thursday, the 26th day of August, 2021. Sd/- (VIKAS AWASTHY) �याियक सद�य / JUDICIAL MEMBER मुंबई/Mumbai, �दनांक/Dated:26/08/2021 SK, PS �ितिल�प अ�े�षतCopy of the Order forwarded to : अपीलाथ�/The Appellant , 1. �ितवाद�/ The Respondent. 2. आयकर आयु�(अ)/ The CIT(A)- 3.

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