SHRI. RAVINDRA BHASKAR DESHMUKH,KALYAN vs. DY. CIT, PANVEL
What did the Tribunal hold?
The Tribunal held that the profit element embedded in bogus purchases is liable to be added to the income, not the entire amount. They estimated the profit ratio at 12.5% of the bogus purchase.
What were the facts?
The assessee claimed purchases from certain parties, which the AO suspected to be bogus and inflated to reduce profit. The CIT(A) confirmed 25% of the alleged bogus purchases as disallowance.
What were the issues?
Whether the entire amount of alleged bogus purchases should be disallowed, or only the profit element embedded therein.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cases cited in this judgment(5)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- CIT v. Simit P. Sheth1,465 citing356 ITR 451 · 2013 · HC
- CIT v. Bholanath Poly Fab. Pvt. Ltd.712 citing355 ITR 290 · 2013 · HC
- Sanjay Oilcake Industries v. CIT460 citing316 ITR 274 · 2009 · HC · Read judgment
- Sanjeev Woolen Mills v. CIT75 citing279 ITR 434 · 2005 · SC · Read judgment
- ITO v. Permanand39 citing107 TTJ 395 · 2007 · ITAT
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the above mentioned appeals against the order dated 04.02.2019 passed by the Commissioner of Income Tax (Appeals) -2, Thane [hereinafter referred to as the “CIT(A)”] relevant to the A.Ys. 2010-11 & 2011-12.
The assessee has filed the present appeal against the order dated 04.02.2019 passed by the Commissioner of Income Tax (Appeals) -2, Thane [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2010-11. ITA Nos. 1951 & 1952/M/2019 A.Ys.2010-11 & 2011-12 3. The assessee has raised the following grounds: -
1 The Lord CIT(A)-2 Thane disallowed to the extent of 25% i.e. Rs.7,90,688/- (25 x 31,62,752/- /100 of total alleged bogus purchases of Rs.31,62,752/- is confirmed and balance amount of Rs.23,72,064/- Rs.31,62,752/- (-) Rs.7,90,688/- is deleted. My Lord it is genuine purchase made from the Coat Trading Company and Shah Industries. The appellant is the end user of the material so purchased, the appellant has not inflated its purchase to reduce the tax profit so purchase is not the bogus purchase. Please delete the disallowance confirmed by the CIT(A)-2 Thane to the extent of Rs.7,90,688/-.
Brief facts of the case are that the assessee filed his return of income on 02.10.2010 declaring total income to the tune of Rs.93,41,260/- excluding agricultural income of 12,76,100/-. The return of income was processed u/s 143(1) of the I. T. Act, 1961. Thereafter, the case of the assessee was reopened u/s 148 of the I. T. Act, 1961 on 16.07.2013. Notice u/s 148 of the Act after recording the reason as the assessee had made bogus purchase in order to inflate the expenses. Thereafter, the notices u/s 143(2) & 142(1) of the Act on 26.09.2014 were issued and served upon the assessee. The assessee was engaged in the business as Civil Contractor under the proprietary concern M/s. R. B. Deshmukh. During the year under consideration, the assessee has shown net profit of Rs.93,68,340/- on a total sale /receipts of Rs.14,86,75,331/- which worked out to 6.30% of total sales/receipts. The total income of the assessee was assessed to the tune of Rs.1,25,04,010/-. Feeling aggrieved, the assessee has filed an appeal before the CIT(A) who partly allowed the claim of the assessee, but, the assessee was not satisfied, therefore, the assessee has filed the present appeal before us. A.Ys.2010-11 & 2011-12 5. We have heard the argument advanced by the Ld. Representative of the Department and perused the record. The Ld. Representative of the revenue has argued that the CIT(A) has wrongly reduced the addition to the extent of 25% of the alleged bogus purchase, therefore, the finding of the CIT(A) is not justifiable, hence, is liable to be set aside. In the instant case, the AO issued the notices to the parties u/s 133(6) which were not served. Thereafter, the AO asked the assessee to produce the parties to which the assessee failed to produce the same. However, the assessee produced the documents in which it has been showed that the payment was made to the parties by cheque. The assessee also produced the necessary documents showing that the material was received and utilized. The assessee also produced the ledger account, copies of bill for purchase from M/s. Tara Enterprises and M/s. Kotsons Impex, Bank Statements of purchase with quantity details and amounts and sales invoices, delivery challan and ledger account. No further enquiry was done. Sale is not disputed. The books of account has not been rejected. The Hon’ble High Court of Gujarat in case CIT Vs. Simit P. Sheth (2013) 356 ITR 451 (Guj) has held that the profit embedded to the purchase is liable to be added to the income of the assessee in the interest of justice. It is specifically held that the whole addition of bogus purchase is not justifiable. There are number of decisions in which it is specifically held that in case of bogus purchase the addition is liable to be justifiable to the extent of profit element. Some judgements are hereby mentioned below.
(i) CIT Vs. Bholanath Poly Fab Ltd. (2013) 355 ITR 290 (Guj). (HC) (ii) CIT Vs. Simit P. Sheth (2013) 356 ITR 451 (Guj) (iii) CIT Vs. Sanjay Oil Cake Industries (2009) 316 ITR 274 (Guj) (iv) ITO Vs. Permanand (2007) 107 TTJ 395 (Jd) A.Ys.2010-11 & 2011-12 (v) Shri Madhukant B. Gandhi Vs. ITO Bench „B‟ dt. 23.02.2010 (AY 2005-06) (Mum)(Trib) (vi) Sanjeev Woolen Mills Vs. CIT (2005) 279 ITR 434) (SC)
Taking into account, all the facts and circumstances, we are of the view that the end of interest of justice will meet if the profit ratio be estimated @ 12.5% of the bogus purchase. Accordingly, we allowed the claim of the assessee.
The facts of the present case are quite similar to the fact of the case as narrated above while deciding the ITA. No.1951/M/2019, therefore, there is no need to repeat the same. However, the figure is different. The matter of controversy is also the same. The finding given above in ITA. No.1951/M/2019 is quite applicable to the facts of the present case as mutatis mutandis and accordingly we partly allowed the claim of the assessee.
In the result, the appeals filed by the assessee are partly allowed.
Order pronounced in the open court on 20/05/2021 (SHAMIM YAHYA) (AMARJIT SINGH) लेखध सदस्य / ACCOUNTANT MEMBER न्यधनिक सदस्य/JUDICIAL MEMBER मुंबई Mumbai; ददनांक Dated : 20/05/2021 Vijay Pal Singh/Sr. PS A.Ys.2010-11 & 2011-12
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