ITO 6 (3)(1), MUMBAI vs. M/S FLP EQUIPMENT PVT LTD., MUMBAI

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ITA 7060/MUM/2019Status: DisposedITAT Mumbai21 May 2021AY 2009-104 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 order, agreeing that only the profit element embedded in bogus purchases should be disallowed, not the entire amount. The addition of cash purchases was also sustained.

What were the facts?

The Revenue appealed against the CIT(A)'s order restricting the addition for alleged bogus purchases to 12.5%. The assessee failed to prove the genuineness of purchases from certain parties, and the AO made additions. The CIT(A) also added the entire amount of cash purchases made to one supplier.

What were the issues?

Whether the entire amount of alleged bogus purchases should be disallowed, or only the profit element. Whether cash purchases made without satisfactory explanation warrant full disallowance.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

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

Before: SHRI VIKAS AWASTHY

Pronounced: 21/05/2021

अपीलाथ) -ारा/ Appellant by : Ms. Smita Verma *ितवाद, -ारा/Respondent by : None सुनवाई क. ितिथ/ Date of hearing : 04 /05/2021 घोषणा क. ितिथ/ Date of pronouncement : 21/05/2021 आदेश/ ORDER PER VIKAS AWASTHY, J.M: 1. This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-12, Mumbai [hereinafter referred to as ‘the CIT(A)’] dated 12.08.2019 for the Assessment Year (AY) 2009-10.

2.

The brief facts of the case as emanating from the records are: The assessee is engaged in manufacturing of Pumps, Valves, Auto Claves and fitting job work. The assessment in the case of assessee for AY 2009-10 was re-opened on the आअसं. 7060/मुं/2019 (िन.व.2009-10) (A.Y.2009-10)

basis of information received by the office of DGIT(Investigation), Mumbai from the Sales Tax Department, Government of Maharashtra that the assessee has indulged in obtaining accommodation entries from the following parties.

S.No. Party Name Amount in Rs.

1.

Asian Metal Industries 1,83,726/-

2. Malba Metal Corporation 63,020/-

3.

Kushal Steel Corporation 35,19,141/-

Total Rs. 37,65,437/-

During assessment proceedings, the AO issued notices under section 133(6) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) to the dealers on the addresses furnished by the assessee. The notices were received back unserved by postal authority with remarks “Left” or “not known”. Further, the assessee failed to produce necessary documents to prove trail of goods such as, transport receipt, stock register, gate pass, etc. to prove genuineness of the purchases. The AO made addition of the entire alleged bogus purchases.

3. Aggrieved by the assessment order dated 20.03.2015 passed under section 143(3) read with section 147 of the Act, the assessee filed appeal before the CIT(A). In First Appellate proceeding, the CIT(A) observed that the assessee has made cash payments of Rs. 6,86,000/- to Kushal Steel Corporation, the assessee failed to explain before the CIT(A), the reasons for cash payments. Consequently,

आअसं. 7060/मुं/2019 (िन.व.2009-10) (A.Y.2009-10) the CIT(A) made addition of the entire payments made in cash. On the remaining amount of alleged bogus purchases, the CIT(A) restricted the addition to 12.5%. Hence, the present appeal by the Revenue.

4.

Ms. Smita Verma representing the Department vehemently defended the impugned order and prayed for 100% addition of the bogus purchases. To support her contentions, the ld. DR placed reliance on the decision of Hon’ble Supreme Court of India in the case of N.K. Proteins Ltd. in SLP No. 769 of 2017.

5.

Submissions made by ld. DR heard, orders of authorities below examined. The Revenue is in appeal against the order of CIT(A) in restricting the disallowance on bogus purchases to 12.5%. Undisputedly, in assessment proceedings, the assessee failed to discharge its onus in proving the authenticity of the dealers and genuineness of the purchases. The Hon’ble Jurisdictional High Court in case of PCIT vs. Paramshakti Distributors Pvt. Ltd. in of 2017 decided on 15.07.2019 has held that in case of bogus purchase transactions, entire bogus purchases cannot be added, it is only the profit element embedded in the bogus purchase that has to be disallowed. The CIT(A) has estimated GP at the rate of 12.5% on alleged bogus purchases. The CIT(A) has further observed that from one of the supplier, the assessee has made cash purchases of Rs. 6,86,000/-. No satisfactory explanation has been furnished by assessee to show the necessity of making cash payment, the CIT(A) has invoked the provisions of Rule 6DD and made addition of entire such cash payment.

आअसं. 7060/मुं/2019 (िन.व.2009-10) (A.Y.2009-10)

6.

I concur with the findings of CIT(A). Consequently, the impugned order is upheld and appeal of the Revenue is dismissed, sans merit.

Order pronounced in the open court on Friday, the 21st day of May, 2021.

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