ITO 33 (2)(3), MUMBAI vs. SHRI. MUKESH HIMMATLAL MISTRY, MUMBAI

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ITA 190/MUM/2020Status: DisposedITAT Mumbai24 August 2021AY 2011-124 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, stating that when sales turnover is accepted, only the profit element embedded in bogus purchases can be taxed, not the entire amount. The appeal by the Revenue was dismissed.

What were the facts?

The Revenue appealed against the CIT(A)'s order which restricted the addition for bogus purchases to 12.5% of the total alleged bogus purchases. The assessee had procured bogus purchase bills, and despite notices, failed to provide satisfactory evidence of genuineness.

What were the issues?

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

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 133(6)

AI-generated summary — verify with the full judgment below

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

Hearing: 14/06/2021Pronounced: 24/08/2021

ORDER PER VIKAS AWASTHY, J.M: This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-45 Mumbai [hereinafter referred to as ‘the CIT(A)’] dated 24.10.2019 for Assessment Year (AY) 2011-12. 2. The brief facts of the case as emanating from records are: The assessee is a civil contractor. The assessment for A.Y. 2011-12 in the case of assessee was re- आअसं. 190/मुं/2020 (िन.व.2011-12) (A.Y.2011-12) opened on the basis of information received from Sales Tax Department, Government of Maharashtra and DGIT (Investigation), Mumbai. As per the information received, the assessee has procured bogus purchase bills to the tune of Rs. 14,77,896/- from the following parties: (1) V.M. Udyog Rs. 7,57,756/- (2) Vardhman Traders Rs. 7,20,140/- Total Rs. 14,77,896/- The assessee failed to furnish documentary evidence to the satisfaction of Assessing Officer (AO) to prove genuineness of the dealers and the purchases made from them. Hence, the AO made addition of the entire alleged bogus purchases. Against the assessment order dated 22.12.2016 passed under section 143(3) read with section 147 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’]. The assessee filed appeal before the CIT(A). The CIT(A) after examining the facts restricted the addition to Rs. 1,84,737/- by estimating suppressed profit @ 12.5% on bogus purchases.

3.

Now, the Revenue is in appeal assailing the relief granted by the CIT(A) in respect of bogus purchases.

4.

Sh. Sanjay J. Sethi representing the Department vehemently defended the assessment order and prayed for reversing the findings of CIT(A) on the issue of bogus purchases. The ld. Departmental Representative (DR) submitted that during assessment proceedings, the assessee could neither produce the suspicious dealers nor any confirmations were filed from them. The AO had issued notice under section 133(6) of the Act to the dealers, the same were retuned back by postal authorities unserved. No documentary evidence in the आअसं. 190/मुं/2020 (िन.व.2011-12) (A.Y.2011-12) form of delivery challens, transport receipts, octroi receipts, inward register, etc. were furnished by the assessee to prove trail of goods. The AO was, therefore justified in disallowing entire bogus purchases. The ld. DR in support of his contentions placed reliance on the decision of Hon’ble Apex Court in the case of N.K. Proteins Ltd. Vs. DCIT [84 taxmann.com 195].

5.

Submissions made by ld. DR heard, orders of authorities below examined. Undisputedly, the assessee failed to discharge his onus in proving authenticity of the dealers and the purchases made from said dealers. At the same time, it is observed that the sales turnover declared by the assessee was accepted by the AO. Without purchases, the assessee could not have executed the work allotted to him. The CIT(A) has upheld the findings of AO to the extent of assessee’s involvement in obtaining bogus purchase bills. The CIT(A) has restricted the disallowance on bogus purchase by estimating suppressed profit margin in unproved transactions @ 12.5%. The Hon’ble Jurisdictional High Court in the case of PCIT vs. Paramshakti Distributors Pvt. Ltd. in Income Tax Appeal No. 413 of 2017 decided on 15.07.2019 has held that where sales turnover has been accepted, entire alleged bogus purchase cannot be disallowed, it is the profit element embedded in such transactions that can only be brought to tax.

6.

We concur with the findings of CIT(A), hence, the impugned order is upheld and the appeal of Revenue is dismissed, being devoid of any merit. Order pronounced in the open court on Tuesday, the 24th day of August, 2021. Sd/- Sd/- (MANOJ KUMAR AGGARWAL) (VIKAS AWASTHY) लेखा सद�य / ACCOUNTANT MEMBER �याियक सद�य / JUDICIAL MEMBER मुंबई/Mumbai, �दनांक/Dated: 24/08/2021

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