MANOJ BOKADIA,MUMBAI vs. ITO 19(2)(3), MUMBAI

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ITA 4511/MUM/2019Status: DisposedITAT Mumbai25 June 2021AY 2011-124 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that while the assessee failed to prove the genuineness of purchases, the entire bogus purchases could not be added. Only the profit element embedded in such transactions is taxable. The addition was restricted to 8% of the alleged bogus purchases.

What were the facts?

The assessee, engaged in metal trading, was found to have obtained bogus purchase bills amounting to Rs. 2,19,18,422/-. The Assessing Officer added Rs. 13,96,763/- by estimating a 12.5% margin on these purchases. The CIT(A) enhanced the addition to 100% of the alleged bogus purchases.

What were the issues?

Whether the entire amount of bogus purchases can be added to the income, or only the profit element embedded therein. Whether reopening of assessment and enhancement by CIT(A) were justified.

Which sections of the Income-tax Act were involved?

Section 251(1)(a),Section 234A,Section 234B,Section 234C,Section 234D,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

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

Before: SHRI VIKAS AWASTHY

Hearing: 07/04/2021Pronounced: 25/06/2021

आयकर अपील�य अ�धकरण मुंबई पीठ “एस एम सी” , मुंबई �ी �वकास अव�थी, �या�यक सद�य के सम� IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC ”, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER आअसं. 4511/मुं/2019 (�न.व 2011-12) (A.Y 2011-12) Manoj Bokadia, M/s. Sharon Fitting Impex, Pawapuri Building, 9th Khetwadi Lane, Near Jain Temple, Mumbai 400 004. PAN: ALRPB-8253-A ...... अपीलाथ� /Appellant बनाम Vs. Income Tax Officer-19(2)(3), Matru Mandir Bldg., Room No.221, 2nd Flor, Tardeo, Mumbai 400 007 ..... ��तवाद�/Respondent अपीलाथ� �वारा/ Appellant by : None ��तवाद� �वारा/Respondent by : Ms. Smita Verma सुनवाई क� �त�थ/ Date of hearing : 07/04/2021 घोषणा क� �त�थ/ Date of pronouncement : 25/06/2021 आदेश/ ORDER

This appeal by the assessee is directed against ex-parte order of Commissioner of Income Tax(Appeals)-30, Mumbai [in short 'the CIT(A)’] dated 20/05/2019 for the assessment year 2011-12..

2.

The brief facts of the case as emanating from records are: The assessee is engaged in trading of ferrous and non-ferrous metals. The assessment for assessment year 2011-12 in the case of assessee was reopened for the reason that the assessee had allegedly obtained bogus purchase bills amounting to Rs.2,19,18,422/- from various (5), dealers declared as hawala operators.

During assessment proceedings, the assessee could neither produce dealers nor confirmations from them. Further, the assessee failed to prove physical delivery of the goods. The Assessing Officer after examining the facts of case and documents on record concluded that assessee made purchases from grey market and thereafter obtained bogus purchase bills from entry providers. The Assessing Officer rejected the books of assessee and made addition of Rs.13,96,763/- by estimating margin @ 12.5% on bogus purchases. Aggrieved by the assessment order dated 18/10/2016 the assessee filed appeal before the CIT(A). The CIT(A) after issuing notice under section. 251(1)(a) of the Income Tax Act, 1961 ( in short ‘the Act’) to the assessee enhanced addition on account of bogus purchases to 100%. Hence, the present appeal by the assessee.

3.

The assessee in appeal has inter-alia assailed reopening of the assessment as well as enhancement made by CIT(A) in ex-parte proceedings..

4.

Submissions made by ld.Departmental Representative heard, orders of authorities below examined. Undisputedly, the assessee has failed to discharge his onus in proving genuineness of purchases and authenticity of the dealers. At the same time it is observed that the Assessing Officer has not disputed the sales and stock statement declared by the assessee. Without purchases, there cannot be sales, hence entire bogus purchases cannot be added. It is only profit element embedded in such transactions that can be brought to tax [ Ref: PCIT vs. Paramshakti Distributors Pvt. Ltd., Income Tax Appeal No.413 of 2017 decided on 15th July, 2019] .Generally, in trading of ferrous and non-ferrous metals, the G.P ranges between 5% to 8%. The CIT(A) erred in making addition of entire alleged bogus purchases. Taking into consideration entirety of facts, I am of considered view that to meet the ends of justice addition to the extent of 8% of alleged bogus purchases would be fair and reasonable. The grounds No.2 to 8 of appeal are partly allowed in the aforesaid terms.

5.

In ground No.1 of appeal, the assessee has assailed re-opening of assessment. Similar ground was raised by the assessee before the CIT(A). There is no contrary material before the Bench to take a different view. Accordingly, ground No.1 of appeal is dismissed.

6.

In ground No.9 of appeal, the assessee has assailed charging of interest under section 234A, 234B, 234C and 234D of the Income Tax Act, 1961( in short ‘the Act’). Charging of interest under aforesaid sections is consequential and mandatory, therefore, this ground of appeal is dismissed being devoid of any merit.

7. In ground No.10 of appeal, the assessee has assailed initiation of penalty proceedings under section 271(1)(c) of the Act. Challenge to penalty proceedings at this stage is premature, hence, ground No.10 of the appeal is dismissed as such.

8.

In the result, appeal by assessee is partly allowed.

Order pronounced in the open Court on Friday, the 25th day of June, 2021

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