ITO 23 (2)(2), MUMBAI vs. SHRI. KUMAR BALUMAL ROHRA, MUMBAI

ORDER PER VIKAS AWASTHY, J.M: These two appeals by the Revenue are directed against the order of Commissioner of Income Tax (Appeals)-33, Mumbai [hereinafter referred to as

आअसं. 87 & 88/मुं/2020 (िन.व.2009-10 & 2010-11) & 88/MUM/2020 (A.Y.2009-10 & 2010-11) ‘the CIT(A)’] ' dated 15.10.2019 common for the Assessment Years (AYs) 2009- 10 & 2010-11. Since, the issue raised in both the appeals by the Revenue and the grounds of appeal are identical, these appeals are taken up together for adjudication and are decided by this common order.

2. For the sake of convenience, the facts involved in these appeals are narrated from the appeal of the Revenue for AY 2009-10. AY-2009-10

3. The brief facts of the case as emanating from records are: The assessee is engaged in trading of zip fasteners, garment accessories, etc. The assessment for AY 2009-10 & 2010-11 in the case of assessee were re-opened on the basis of information received from the Sales Tax Department, Government of Maharashtra. As per the information received, the assessee obtained bogus bills from dealers, declared as hawala operators. During the period relevant to the AY 2009-10, the assessee had allegedly obtained bogus purchase bills amounting to Rs. 12,27,897/- from seven such dealers. The assessee failed to prove genuineness of the dealers and the purchases made from them to the satisfaction of Assessing Officer (AO). The AO rejected the books of assessee under section 145(3) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] and made addition of the entire alleged bogus purchases. Aggrieved by the assessment order dated 04.03.2016 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 of the case estimated profit element embedded in bogus purchases @ 20% and hence, restricted the आअसं. 87 & 88/मुं/2020 (िन.व.2009-10 & 2010-11) & 88/MUM/2020 (A.Y.2009-10 & 2010-11) addition to Rs. 2,45,579/-. Against the findings of the CIT(A), the Revenue is in appeal before the Tribunal.

4. Sh. Sanjay J. Sethi representing the Department submitted that the assessee has failed to discharge his onus in proving genuineness of the dealers and the purchases made from them. The AO had issued notice under section 133(6) of the Act to the suspicious dealers, however, the same remained unresponded. The AO got the enquiries conducted through Ward Inspector and it was found that the parties are non-existent. The assessee failed to produce books and relevant document to substantiate trail of goods. The assessee neither produced the dealers nor any confirmations were filed from them. The ld. Departmental Representative (DR) prayed for reversing the findings of CIT(A) and upholding the addition made by the AO.

5. Submissions made by ld. DR heard, orders of the authorities below examined. Undisputedly, the assessee failed to discharge his onus in proving authenticity of the suspicious dealers and the purchases made from them. We observe that the AO has accepted the sales turnover declared by the assessee. Without purchases there cannot be sales, therefore, entire alleged bogus purchases cannot be disallowed. It is the profit element embedded in such transactions that can only be brought to tax [Re: PCIT vs. Paramshakti Distributors Pvt. Ltd. in Income Tax Appeal No. 413 of 2017 decided on 15.07.2019]. The AO has erred in disallowing entire alleged bogus purchases. The CIT(A) has estimated suppressed profit margin embedded in alleged bogus transactions at 20%. We concur with the findings of CIT(A), hence, the impugned order is upheld and appeal of the Revenue is dismissed, sans merit.