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Income Tax Appellate Tribunal, “A” Bench, Mumbai
O R D E R Per Shamim Yahya (AM) :-
This appeal by the Revenue is directed against the order of learned CIT(A) dated 26.7.2019 pertaining to assessment year 2009-10.
Grounds of appeal
raised by the Revenue read as under :- "Whether on the facts and circumstances of the case and in Law, the Ld. CIT(A) was correct in restricting the 100% disallowances made by the A. O. and confirmed to only 6% of the bogus purchases from hawala traders M/s. Shubhalaxmi Corporation, without appreciating the fact that the purchases are made from parties declared by Maharashtra Govt., VAT Department as hawala dealers ?
3. Brief facts of the case are that assessee is a limited company engaged in the business of printing and manifold computer stationery, packing material and advertising. The return of income for AY 2009-10 was filed on 29.09.2009 declaring total income of Rs.2,58,95,610/- under normal provisions of the Act. The Assessing Officer received information from DGIT(Inv), Mumbai/Sales Tax Department that some of the dealers under Modvat Act 2002 indulging in the practice of providing accommodation entries by issuing bogus purchase
2 M/s. Axis Ad Print Media (I) Ltd. invoices without supplying the goods physically. The said information along with list of beneficiaries was forwarded to the Income-tax department and was also put on the website. As per the said list, the assessee received entries of bogus purchases for Rs.63,88,026/- from suspicious dealers by name Shubhalaxmi Corporation. After recording the reasons and following due procedure, the AO reopened the assessment u/s 147 of the I.T. Act. Reassessment was completed on 25.03.2015. The AO has mentioned in the order that as per the information from the Sales tax department purchases were made by the assessee from a suspicious dealer Shubhalaxmi Corporation. During the course of assessment proceedings the assessee contended that the purchases were genuine. AO issued notices u/s 133(6) to the parties calling for the details, which were returned back. AO asked the assessee to furnish all the relevant evidence to establish that goods were actually supplied, to discharge the onus. In reply, the assessee filed submission, details etc. Being not satisfied with the details filed, the AO held that the assessee failed to produce the suppliers, brokers or transporters in spite of opportunity being given and concluded that the purchases from Shubhalaxmi Corporation were bogus and not genuine and added the total purchases as suppressed profit to the income returned.
Upon assessee’s appeal learned CIT(A) restricted the disallowance to 6% holding as under : “I have considered the assessment order and the submissions of the appellant including the case laws cited. The AO held in the assessment order that the appellant produced the details with regard to purchases made. Assessee filed copies of ledger account of parties, purchase bills, copies of bank statement showing the each and every payment for purchases. It is noticed that on account of non-production of suppliers and brokers, transportation bills etc. the AO added 100% of the amount as non genuine purchases. It is seen that many Benches of ITAT and Hon'ble High Courts have held that when purchases are supported by sufficient documentary evidences, then merely because of non-appearance before the AO, one cannot conclude that the purchases were not made by the assessee. Further, this is also not case in which the signed blank cheque books are found with the buyer to hold that the purchases of material were not at all made but was entered in the stock to inflate the raw material. Therefore the decision of the 3 M/s. Axis Ad Print Media (I) Ltd.
Supreme Court in the case of N K Proteins Ltd 250 taxman 0022(SC) would not apply to the case.”
Thereafter learned CIT(A) placed reliance upon several case laws including ITAT decision in assessee’s own case as under :- “Keeping in view the totality of facts and circumstances of the case and respectfully following the decision of Hon'ble ITAT, Mumbai in appellant's case for AY 2010-11, the addition is restricted to 6% of bogus purchases. Accordingly, 6% of bogus purchases of Rs.63,88,026 coining to Rs.3,83,282 is sustained. The AO is directed to modify the addition accordingly. The appellant gets part relief.”
Against the above order Revenue is in appeal before us.
We have heard learned Departmental Representative and perused the records. Upon careful consideration we find that assessee has provided the documentary evidence for the purchase. Adverse inference has been drawn due to the inability of the assessee to produce the suppliers. We find that in this case the sales have not been doubted. It is settled law that when sales are not doubted, hundred percent disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from honourable jurisdictional High Court decision in the case of Nikunj Eximp Enterprises (in writ petition no 2860, order dated 18.6.2014). In this case the honourable High Court has upheld hundred percent allowance for the purchases said to be bogus when sales are not doubted. However in that case all the supplies were to government agency. In the present case the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. As noted by learned CIT(A) ITAT in assessee’s own case for earlier year has restricted the disallowance to 6%, hence following the precedent we uphold the order of learned CIT(A).
4 M/s. Axis Ad Print Media (I) Ltd.
In the result this appeal filed by the Revenue stands dismissed.
Pronounced in the open court on 7.7.2021.