ITO WARD 6 (3)(3), MUMBAI vs. J.K.SWITCHGEARS & KABLE PVT. LTD., MUMBAI

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ITA 7058/MUM/2019Status: DisposedITAT Mumbai16 July 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 since the AO accepted the assessee's sales turnover, only the profit element in suspicious transactions could be taxed, not the entire purchase amount. The CIT(A)'s estimation of profit at 12.5% was upheld.

What were the facts?

The Revenue appealed against the CIT(A)'s order which restricted disallowance of bogus purchases to 12.5% profit margin, instead of the full disallowance made by the AO. The assessee failed to prove the genuineness of dealers and purchases from them.

What were the issues?

Whether the entire bogus purchases should be disallowed or only the profit element embedded in them, when the assessee fails to prove genuineness but sales turnover is accepted.

Which sections of the Income-tax Act were involved?

Section 133(6)

AI-generated summary — verify with the full judgment below

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

Before: SHRI VIKAS AWASTHY

Hearing: 03/05/2021Pronounced: 16/07/2021

ORDER PER VIKAS AWASTHY, J.M: These two appeals by the Revenue are directed against the order of Commissioner of Income Tax (Appeals)-12, Mumbai [hereinafter referred to as ‘the CIT(A)’] for the Assessment Years (AY) 2009-10 & 2010-11, respectively.

1.

आअसं. 7058/मुं/2019 (िन.व.2009-10) (A.Y.2009-10) आअसं. 7059/मुं/2019 (िन.व.2010-11) (A.Y.2010-11) Both the impugned orders are of even date i.e. 20.08.2019. Since, the issue raised in both the appeals is identical. These appeals are taken up together for adjudication and are decided by this common order. ITA No. 7058/Mum/2019 (AY-2009-10)

2.

Ms. Smita Verma representing the Department submitted that during the period relevant to AY under appeal, the assessee has obtained accommodation entries to the tune of Rs. 1,45,829/- from dealers engaged in providing bogus bills. The name of said dealers appear in the list of hawala operators declared by the Sales Tax Department, Government of Maharashtra. During assessment proceedings, the assessee failed to discharge its onus in proving genuineness of the aforementioned dealers and purchases made from them. The notices issued under section 133(6) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] to the suspicious dealers were received back unserved from the postal authorities, no confirmations from the said dealers nor any documentary evidence to prove trail of goods were furnished by the assessee. Thus, the Assessing Officer (AO) made addition of entire unproved purchases. In first appellate proceedings, the CIT(A) restricted the disallowance in respect of bogus purchases to Rs. 18,229/- by estimating profit margin on such purchases at 12.5%. The Revenue is in appeal against the relief granted by the CIT(A). The ld. Departmental Representative (DR) prayed for restoring 100% disallowance made by AO on bogus purchases.

4.

Submissions made by ld. DR heard, orders of the authorities below examined. Undisputedly, the assessee has failed to discharge its onus in proving genuineness of the dealers and the purchases made from them. At the आअसं. 7058/मुं/2019 (िन.व.2009-10) (A.Y.2009-10) आअसं. 7059/मुं/2019 (िन.व.2010-11) (A.Y.2010-11) same time, it is observed that the AO has accepted sales turnover declared by the assessee. Under such circumstances, entire alleged bogus purchases cannot be disallowed. It is only the profit element embedded in such suspicious transaction 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 AO has erred in making addition of the entire alleged bogus purchases. In first appellate proceedings, the CIT(A) after examining the facts of the case and considering various decisions rendered by the Hon’ble High Courts and different benches of the Tribunal restricted the addition to 12.5% of alleged bogus purchases. I see no infirmity in the order of CIT(A), hence, the same is upheld and appeal of the Revenue is dismissed, sans merit. ITA No. 7059/Mum/2019 (AY-2010-11)

5.

The ld. DR submitted that the facts in AY 2010-11 are identical to the appeal for AY 2009-10, except for the quantum of bogus purchases.

6.

The assessee in AY 2010-11 has allegedly obtained bogus purchase bills aggregating to Rs. 12,74,894/- from suspicious dealers. The AO for similar reasons to AY 2009-10 disallowed entire alleged bogus purchases. In first appellate proceedings, the CIT(A) upheld the findings of AO to the extent of assessee’s involvement in obtaining bogus purchase bills, however, the CIT(A) restricted the addition to 12.5% of alleged bogus purchases. Since, the facts in impugned AY are pari materia to the facts in AY 2009-10, the findings for upholding the impugned order would mutatis mutandis apply to the present appeal. The appeal of Revenue is dismissed for parity of reasons.

आअसं. 7058/मुं/2019 (िन.व.2009-10) (A.Y.2009-10) आअसं. 7059/मुं/2019 (िन.व.2010-11) (A.Y.2010-11) 7. To sum up, the appeal of Revenue for AY 2009-10 & 2010-11 are dismissed.

Order pronounced in the open court on Friday, the 16th day of July, 2021.

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