Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & PAVAN KUMAR GADALE, JM Shrinivas Yankaiyya Gangapuram
O R D E R Per Shamim Yahya, A. M.:
This appeal by the revenue is directed against the order of the learned Commissioner of Income Tax (Appeals)-26, Mumbai (‘ld.CIT(A) for short) dated 31.05.2019 and pertains to the assessment year (A.Y.) 2011-12.
The grounds of appeal read as under:
(1) "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.3,19,910/- made by the Assessing Officer on account of bogus purchases without appreciating the fact that parties from whom these purchases were made proven accommodation entry providers, as concluded by Sales Tax Authorities pursuant to the investigation carried out by them"? (2) "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the latest Apex Court Decision in the case of N.K. Protein Ltd Vs.DCIT (769 OF 2017), wherein the Hon'ble Supreme Court has confirmed 100% addition made on account of bogus purchases ? (3) The appellant prays that the order of Ld.CIT(A) on the above grounds be reversed and that of the Assessing officer be restored.
The brief facts of the case are that the information was received from the Sales Tax authorities, duly forwarded by DGIT (Investigation), Mumbai regarding various
2 4760/Mum/2019 entities who were engaged in the activity of giving accommodation bills without actually supplying the goods. It was seen that during the previous year relevant to the assessment year under consideration, as per information, the appellant had obtained bogus bills from the following parties: -
Sr.No. Name of the Party AY Amount (in Rs.)
Nisha Enterprise 2011-12 1,64,300
2 Padmavati 2011-12 1,55,610 Trading Co.
Total 3,19,910 The assessment was accordingly re-opened and notice u/s 148 of the IT. Act was issued and served on the appellant. Statutory notices u/s.143(2) & 142(1) were issued and duly served on the appellant. During the re-assessment proceedings, the AO issued notice u/s 133(6) to the above mentioned parties which was returned unserved by the postal authorities. This fact was communicated to the appellant who was asked to furnish the correct/new address of the party. Since the appellant failed to do so, the appellant was asked to produce the party along with the relevant evidences so as to verify the identity of the party and the genuineness of the transactions. The appellant, however, expressed his inability to do so. The appellant submitted copies of bills and reconciliation statement of sales corresponding to purchases made. However, no delivery challans or transportation details were submitted. The AO held that the appellant had failed to discharge his onus of proving the genuineness of the transactions. Since corresponding sales of purchases had been accounted for, the AO was of the view that the purchases have been made from undisclosed parties in the open market in cash but not from the above mentioned party from whom only bills were obtained.
Upon assessee appeal Ld.CIT(A) deleted the addition by giving a finding that in original assessment 15% disallowance has already been done. The Ld. CIT(A) held as under:-
3 4760/Mum/2019 6.1 In the original assessment income was assessed at Rs 8,73,3407- by adding '5% of the alleged bogus purchases. The case was reopened on the basis of information received from DGIT (Inv.) Mumbai and purchases of Rs. 3,19,910/- were held as bogus purchases. Therefore AO disallowed entire bogus purchase as 15% of the purchases were disallowed in the original assessment balance 85% of the purchases were added. 6.2. During appellate proceedings it was stated that case was re-opened to examine purchases of Rs. 1,64,3007- from M7s. Nisha Enterprises and Rs. 1,55,6107- from M/s. Padmavati Trading Co. Copies of purchase invoices, bank statement and copy of VAT audit report was filed. It was contended that purchase from M/s. Padmavati Trading Co was for computer and its accessories and the purchases were part of fixed assets not of the stock in trade. Therefore no addition can be made for purchases made for fixed assets. The contention of the assessee has been verified from the supporting evidences filed. Regarding purchases from M/s. Nisha Enterprises it was stated that 15% has already been disallowed in original assessment proceedings, therefore the further addition made by AO may be deleted. In such a situation, the various Courts including the Hon'ble Gujarat High Court in the case of CIT vs Simit P. Sheth, 356 ITR 451 have held that not the entire purchases but only the profit element embedded in these purchases was to be disallowed and accordingly held that 12.5% of the purchases will be reasonable as profit on margin against the bogus purchases. Therefore, addition of 15% made in the original assessment is reasonable and there is no need of further addition of 85% with respect to same purchase: Therefore, the addition made by AO is deleted and ground of appeal is 'Allowed.'
Against the above revenue is in appeal before us.
We have heard the Ld. DR and perused the records. We find that Ld.CIT(A) has given a reasonable order. Without doubting the sales such disallowances tantamounting to 100% disallowances which is not sustainable on the touchstone of Bombay High court decision in Nikunj Eximp Enterprises Pvt.Ltd. vs CIT. The decision referred by revenue in grounds of appeal has already been explained by Hon’ble Bombay High Court in the case of Adam H.Kazi Hence, we uphold the order of Ld.CIT(A).
In the result, this appeal by the revenue stands dismissed.
Order pronounced in the open court on 11.06.2021