ITO- 26(2)(5), MUMBAI, MUMBAI vs. RAJKUMAR JIVRAM MISHRA, MUMBAI

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ITA 6119/MUM/2019Status: DisposedITAT Mumbai02 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 upheld the CIT(A)'s decision to tax only the profit embedded in bogus purchases, following the Gujarat High Court's precedent. The Tribunal found the 12.5% rate to be justified and reasonable.

What were the facts?

The Revenue appealed against the CIT(A)'s order which restricted the addition for bogus purchases to 12.5% instead of 100% made by the AO. The AO had made the addition after reopening the case based on information about hawala purchase entries.

What were the issues?

Whether the entire amount of bogus purchases should be added to the income, or only the profit element embedded therein. The applicability of the Gujarat High Court's decision in CIT vs. Simit P. Sheth.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 148,Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

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

Before: SHRI SAKTIJIT DEY & SHRI RAJESH KUMAR

For Respondent: Ms. Smita Verma, D.R
Hearing: 28.06.2021Pronounced: 02.07.2021

Per Rajesh Kumar, Accountant Member:

1.

The present appeal has been preferred by the Revenue against the order dated 24.03.2019 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11.

2.

At the time of hearing when the case was called for hearing, neither assessee nor his authorised representative was present to attend the hearing nor any application for adjournment was filed. Therefore, we are deciding the appeal of the Revenue after hearing the Ld. D.R. and after considering the merits of the case.

2 Mr. Rajkumar Jivram Mishra 3. The only issue raised by the Revenue is against the order of Ld. CIT(A) restricting the addition to 12.5% of the bogus purchases as against 100% made by the AO.

4.

The facts in brief are that the assessee filed the return of income on 26.09.2010 declaring total income of Rs.10,31,250/- which was processed under section 143(1) of the Act. The case of the assessee was thereafter reopened by the AO after receipt of information from DGIT (Inv.), Mumbai that assessee is beneficiary of hawala purchase entries to the extent of Rs.2,60,000 /- and accordingly the notice under section 148 of the Act was issued on 30.03.2017. The AO called for various details and information from the assessee from time to time during the course of assessment proceedings which were duly filed before the AO. The AO finally rejected the contentions of the assessee and treated the purchases as non genuine thereby making an addition of 100% of the purchases of Rs. 2,60,000/- to the income of the assessee by framing assessment under section 143(3) read with section 147 of the Act dated 11.12.2017.

5.

In the appellate proceedings, the Ld. CIT(A) partly allowed the appeal of the assessee by directing the AO to apply rate of 12.5% of the bogus purchases by following the decision of CIT vs. Simit P. Sheth (2013) 356 ITR 451 (Guj) by holding that only profit embedded in the bogus purchases can be brought to tax and not the entire purchases.

6.

After hearing the Ld. D.R. and perusing the material on record, we observe that Ld. CIT(A) has passed the appellate

3 Mr. Rajkumar Jivram Mishra order after following the decision of Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Sheth (supra) wherein it has been held that in case of bogus purchases only profit element embedded in the bogus purchases is to be assessed. We note that the co-ordinate benches of the Tribunal have been taking a consistent view that in case of bogus purchases only a GP rate ranging between 2% to 12.5% can be applied depending on the facts of the case. In the present case the Ld. CIT(A) has directed to assess the income @ 12.5% which is quite justified and reasonable and therefore we do not find any reason why the Revenue is aggrieved by this order. Accordingly, we uphold the order of the ld CIT(A) by dismissing the appeal of the revenue.

7.

In the result, the appeal of the Revenue is dismissed.

Order pronounced in the open court on 02.07.2021.

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