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Income Tax Appellate Tribunal, MUMBAI ‘SMC’ BENCH, MUMBAI
Shri Kunal Mahesh Patel ....……………….Respondent 24, Mangal Murti, Plot No. 239, Charkop, Kandivali (W), Mumbai 400067[PAN: AHGPP2142R] Appearances: Sunil Deshpande for the appellant Gunjan Kakad for the respondent Date of concluding the hearing: : May 12, 2021 Date of pronouncement : May 19, 2021 O R D E R Per Pramod Kumar, VP:
By way of these appeals, the Assessing Officer has challenged the correctness of the order dated 11th September 2019, passed by the learned CIT(A) in the matter of assessment u/s. 143(3) r.w.s 147 of the Income Tax Act, 1961 for the assessment years 2010-11 & 2011- 12.
Grievances raised by the Assessing Officer are as follows: 1. “On the facts and circumstances of the case and in law , the Ld CIT (A) erred in randomly estimating the disallowance @5% of the bogus purchase without appreciating the fact that AO has held that books of account of the assessee are not reliable and hence rejected.” 2. “On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in restricting the disallowance to 5% of the bogus purchase as identity of the bogus purchase parties & genuineness of the transaction could not be established after carrying out proper independent investigation u/s. 133(6) & also despite the fact that assessee was given sufficient opportunity to produce the parties for verification.” & 6582/Mum/2019 Assessment Years: 2010-11 & 2011-12 Page 2 of 3 3. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the disallowance to 5% of the bogus purchase without appreciating the fact that the AO has specifically asked for proof of delivery of goods, proof of consumption of material, stock register, inward register, confirmation of bogus purchases, and reconciliation of purchases with corresponding sales and the assessee failed to provide the same.”
When this appeal came up for hearing learned Departmental Representative fairly accepted that, as evident from the observations made by the learned CIT(A) in the impugned order the issue in appeal is covered by a decision of the coordinate bench of this tribunal in 5064 & 5065/Mum/2017, for the assessment years 2010-11 and 2011-12.
4. We find that the, learned Commissioner has inter alia observed as follows:- 3.4 In a recent judgment, Hon’ble ITAT, Mumbai vide order 16.02.2018 in 5064 & 5065/Mum/2017 in the case of Shri Sanjay H Shah has restricted the disallowance to 5% of the alleged bogus purchase, as under:- 7. The ld. AR of the Assessee in his submission claimed that VAT rate is only 4%. The rate of VAT is not disputed by Revenue. In our view considering the nature of trade of assessee and the facts of the present case, the disallowance made by AO and sustained by ld. CIT(A) is excessive and unreasonable. In our view the assessee has given sufficient evidences to substantiate its purchases, on which no finding was given by the lower authorities. Moreover, no incriminating material is brought on record except assumption and presumption of AO that assessee has availed accommodation bills. The addition of alleged bogus purchased are based on third party information. We are of the considered opinion that under Income Tax Act only real income can be taxed by the Revenue. We may further note that even in cases where the whole transaction is not verifiable due to various reasons, the only taxable is the taxable income component and not the substantial part of the transaction. Thus, keeping in view the assessee has paid the VAT at the applicable rate on all the purchases. Further, in our view no yardstick formula can be applied while assessing the amount of revenue leakage. Moreover, the revenue has not disputed the consumption of steel. Hence, keeping in view of any possibility of the revenue leakage in the present case, the disallowance of purchases of steel at 5% of the purchases would meet the end of justice. Similar view was taken by Hon’ble Gujarat High Court in CIT Vs Simith P Seth [2013(356 ITR 451)] and by Hon’ble Bombay High Court in Hariram Bhambani ITA No 313 of 2013. 8. Thus, respectfully following the decision of Hon’ble Gujarat High Court in CIT Vs Simit P Seth supra and by Hon’ble Bombay High Court in Hariram Bhambani (supra), the disallowance of cost of purchases of steel is restricted to 5% of the purchases. The assessing officer is directed accordingly. In the result the ground No.1 of the appeal is partly allowed. & 6582/Mum/2019 Assessment Years: 2010-11 & 2011-12 Page 3 of 3 3.4 Keeping in view the totality of facts and circumstances of the case and respectfully following the decision, the addition made by the AO on estimation is restricted to 5% of bogus purchases. Accordingly, 5% of bogus purchases of Rs. 1,11,82,500 coming to Rs. 5,59,125 is sustained. The AO is directed to modify the addition accordingly. The appellant gets part relief. These grounds are partly allowed.
As evident from the above and as the learned Departmental Representative fairly accepts, the issue in appeal is clearly covered by a decision of the coordinate bench for the assessment years 2010-11 and 2011-12.
I see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully following the coordinate bench order, I confirm action of the CIT(A) and decline to interfere in the matter.
In the result, these appeals are dismissed. Pronounced in the open court today on the day 19th of May 2021.