ITO WARD (1)(4), THANE vs. SHRI. ISHWARLAL KANJI PATEL, THANE

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ITA 6467/MUM/2019Status: DisposedITAT Mumbai12 July 2021AY 2010-113 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 while the assessee failed to prove the genuineness of purchases, the entire amount of bogus purchases could not be added as the sales turnover was not disputed. Only the profit element embedded in such purchases is taxable.

What were the facts?

The Assessing Officer reopened the assessment of the assessee, a plywood reseller, suspecting accommodation entries from hawala operators. The AO found bogus purchase bills of Rs. 15,94,119/- from three dealers, which the assessee failed to substantiate.

What were the issues?

Whether the entire amount of bogus purchases can be added to the income when the assessee fails to prove the genuineness of the purchases, or only the profit element embedded therein.

Which sections of the Income-tax Act were involved?

Section 133(6)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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

Before: SHRI VIKAS AWASTHYShri Ishwarlal Kanji Patel

Hearing: 06/05/2021Pronounced: 12/07/2021

ITO, Ward-1(4), Room No. 11, 6th Floor, B-Wing, Wagale Industrial Estate, Thane (W)-400604. ...... अपीलाथ' /Appellant बनाम Vs. Shri Ishwarlal Kanji Patel Shop No.04, Dhanlaxmi Shopping Centre, Tutu Estate, Hiranandani Road, Mumbai-400607. PAN: AQSPP2211L ..... (ितवाद*/Respondent अपीलाथ' +ारा/ Appellant by : Ms. Smita Verma (ितवाद* +ारा/Respondent by : None सुनवाई क, ितिथ/ Date of hearing : 06/05/2021 घोषणा क, ितिथ/ Date of pronouncement : 12/07/2021 आदेश/ ORDER PER VIKAS AWASTHY, J.M: This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-1, Thane [hereinafter referred to as ‘the CIT(A)’] dated 15.07.2019 for the Assessment Year (AY) 2010-11.

2.

Ms. Smita Verma representing the Department submitted that the assessee is reseller of Plywood, Laminates, Flush Doors, Panel Doors, Timber,

आअसं. 6467/मुं/2019 (िन.व.2010-11) (A.Y.2010-11) etc. The assessment for the AY 2010-11 in the case of assessee was reopened on the ground that the assessee is beneficiary of accommodation entries obtained from hawala operators. During the course of assessment, the Assessing Officer (AO) held that the assessee has obtained bogus purchase bills aggregating to Rs. 15,94,119/- from three hawala dealers. The assessee could neither prove genuineness of the dealers nor the purchases made from them. The notice issued under section 133(6) of the Income Tact Act, 1961 [hereinafter referred to as ‘the Act’] by the AO to the aforesaid dealers were received back unserved from postal authorities with remarks “Not Known”. No confirmations from the dealers were either filed by the assessee. Further, the assessee failed to furnish documentary evidence to prove trail of goods, hence, the AO made addition of the entire bogus purchases. In first appellate proceedings, the CIT(A) restricted the addition on account of bogus purchases to 12.5%. The ld. Departmental Representative (DR) placing reliance on the judgment of Hon’ble Supreme Court of India in the case of N.K. Proteins Ltd. v/s DCIT [84 taxmann.com 195] prayed for upholding Assessment Order.

3.

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 dealers and genuineness of the purchases made from them. At the same time, it is observed that the AO has not disputed sales turnover declared by the assessee. Under such circumstances, entire bogus purchases cannot be added. It is only the profit element embedded in such purchases 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) after examining the facts has restricted the addition on account of bogus purchases

आअसं. 6467/मुं/2019 (िन.व.2010-11) (A.Y.2010-11) to Rs. 1,99,265/- by estimating Gross Profit (GP) at 12.5%. I find no infirmity in the impugned order, hence, the same is upheld and appeal of the Revenue is dismissed, sans merit.

Order pronounced in the open court on Monday, the 12th day of July, 2021.

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