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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, VP & SHRI S. RIFAUR RAHMAN, AM
O R D E R भहावीय स िंह, उऩाध्मक्ष के द्वाया / PER MAHAVIR SINGH, VP: This appeal of the Revenue is arising out of order of the Commissioner of Income Tax (Appeals)]-1, Mumbai [in short CIT(A)], in Appeal No. 10352/2017-18 vide dated 19.03.2019. The Assessment was framed by the Income Tax Officer, Ward 3(4), Mumbai (in short ITO/ AO) for the A.Y. 2010-11 vide order dated 15.12.2017 under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the assessee is engaged in the business of reseller in iron and steel under the proprietary concern of M/s Amita Steel Corporation. The Assessing Officer during the course of assessment proceedings noted that the Department has received information from DDIT Investigation Wing 2(3), Mumbai that the assessee is beneficiary of bogus accommodation bills/ entries received from M/s Amita Steel Corporation amount to ₹32,99,671/-. According to Assessing Officer, the assessee has neither produced one Shri. Jignesh Kantilal Desai for cross verification nor given any conformation from him. Accordingly, the Assessing Officer treated the entire purchases as bogus or non-variable and added under section 69C of the Act. Aggrieved, assessee preferred the appeal before CIT(A), who restricted the disallowance at 12.5% by observing in Para 7 to 7.3 as under:-
“7. I have considered the facts of the case and the submissions of the appellant. As the relevant purchases have been debited to the P&L Account and claimed as deduction in computing the profits of the business chargeable to tax, the onus was on the appellant to prove the genuineness of the purchases with satisfactory 7.1 During the course of appellate proceedings the appellant stated that the Hon'ble ITAT, 'B' Bench, Mumbai, in the case of Magnum Steels v/s ACIT, for AY 2010-11, vide dated 28.02.2017, confirmed the disallowance to the extent of 12.5% of bogus purchases. The AR requested that the business of the appellant being same to that of Magnum Steels i.e. trading in iron & steel, the disallowance be restricted to 12.5% of bogus purchases. The relevant part of the order Is reproduced here as under:-
7.2 There cannot be any dispute about the well settled legal proposition that tax can be levied only on real income. It is elementary rule of accountancy as well as of taxation laws that the profit from business cannot be ascertained without deducting cost of purchase from sales, otherwise it would amount to levy of income tax on receipts or sales. Such recourse is not permissible unless it is specifically authorized under any provisions contained in the Act. The Hon'ble Jurisdictional High Court in the case of Harima Bharubhai of 2013 has held that only the profit attributable to the unaccounted sales can be brought to tax. It is further observed that the Hon'ble Gujarat High Court in the case of Simit P Seth (38 taxmann 385) has held that not the entire purchases but only the profit element embedded in such purchases can be added to the income of the assessee. Similar view has been taken by the Gujarat High Court in the cases of Vijay M Mistry Construction Pvt. Ltd (355 ITR 498), Bholanath Polyfab (P) Ltd (355 ITR 290) and Vijay Proteins Ltd (58 taxmann 44).
Aggrieved, now Revenue is in appeal.