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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
ORDER PER VIKAS AWASTHY, J.M: This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-8, Mumbai [hereinafter referred to as ‘the CIT(A)’] dated 14.10.2019 for the Assessment Years (AY) 2010-11.
The solitary issue in the present appeal by the Revenue is against the relief granted by the First Appellate authority in respect of alleged bogus आअसं. 113/मुं/2020 (िन.व.2010-11) (AY-2010-11) purchases. The Assessing Officer (AO) disallowed 100% bogus purchases, the CIT(A) restricted the disallowance to 12.5%.
The assessee is engaged in the business of carneting / processing of waste. In re-assessment proceedings, the AO held that the assessee has obtained bogus purchase bills aggregating to Rs. 16,93,253/- from three parties, stated to be hawala dealers identified by the Sales Tax Department, Government of Maharashtra. Since, the assessee failed to discharge its onus in proving authenticity of the dealers and purchases made from them, the AO made addition of the entire alleged bogus purchase. Against the assessment order dated 02.03.2015 passed under section 143(3) read with section 147 of the Act, the assessee filed appeal before the CIT(A) inter alia challenging re- opening of assessment, as well as, the addition made on merits. The CIT(A) dismissed the ground assailing re-opening of assessment, however, in respect of ground assailing addition made on account of bogus purchases, the CIT(A) granted part relief by restricting the addition to 12.5%. Hence, the present appeal by the Revenue.
Shri Sanjay J. Sethi representing the Department vehemently defended the assessment order and prayed for restoring the addition made by the AO. The ld. Departmental Representative (DR) submitted that the assessee failed to produce the parties from whom alleged purchases were made, no documentary evidence was furnished by the assessee in support of transportation of goods, even genuineness of the dealers could not be verified as the notice issued under section 133(6) of the Act were returned back unserved by the postal authorities. The ld. DR in support of his submissions to restore 100% आअसं. 113/मुं/2020 (िन.व.2010-11) (AY-2010-11) disallowance relied on the decision in the case of N.K. Proteins Ltd. Vs. DCIT, 84 taxmann.com 195 (SC).
Submissions made by ld. DR heard, orders of authorities below examined. Undisputedly, the assessee failed to discharge its onus in proving genuineness of the purchases and the dealers. At the same time, it is observed that the sales turnover declared by the assessee has been accepted by the AO. In such like cases, the entire alleged bogus purchases cannot be disallowed. It is only the profit element embedded in impugned purchase 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]. The CIT(A) has upheld the findings of AO in so far as assessee’s indulgence in obtaining bogus purchase bills. The CIT(A) has restricted the addition to Rs. 2,11,657/- by estimating suppressed profit margin on unproved purchases to 12.5%.
I concur with the findings of CIT(A). The impugned order is upheld and the appeal of Revenue is dismissed, sans merit. Order pronounced in the open court on Friday, the 20th day of August, 2021. Sd/- (VIKAS AWASTHY) �याियक सद�य / JUDICIAL MEMBER मुंबई/Mumbai, �दनांक/Dated: 20/08/2021 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. आयकर आयु� CIT 4.