ITO 11(1)(1), MUMBAI vs. M/S RAHUL GRAPHITES LTD., MUMBAI

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ITA 4531/MUM/2019Status: DisposedITAT Mumbai05 April 2021AY 2011-123 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 decision, stating that only the profit embedded in bogus purchases can be taxed, not the entire amount. The High Court's decision in PCIT vs Pramashakti Distributors Pvt. Ltd. was relied upon.

What were the facts?

The Revenue appealed against the CIT(A)'s order which restricted the addition of bogus purchases to 12.5%. The assessee had obtained purchase bills from a hawala operator, and failed to prove the genuineness of the purchases and the dealer.

What were the issues?

Whether the entire amount of bogus purchases can be added to the income, or only the profit embedded therein. The genuineness of purchases from a declared hawala operator.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 133(6)

AI-generated summary — verify with the full judgment below

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

Before: SHRI VIKAS AWASTHY

Hearing: 06/01/2021Pronounced: 05/04/2021

अपीलाथ� �वारा/ Appellant by : Shri Sanjay J. Sethi ��तवाद� �वारा/Respondent by : None सुनवाई क� �त�थ/ Date of hearing : 06/01/2021 घोषणा क� �त�थ/ Date of pronouncement : 05/04/2021 आदेश/ ORDER

This Appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-18, Mumbai [in short ‘the CIT(A)] dated 26/04/2019 for the assessment year 2011-12.

2.

Shri Sanjay J. Sethi representing the department submitted that during the period relevant to assessment year under appeal, the assessee has obtained bogus purchase bills amounting to Rs.10,95,931/- from M/s. Shruti Traders a declared hawala operator by the Sales Tax Department, Government of Maharashtra. During

आअसं. 4531/मुं/2019 (�न.व.2011-12) (A.Y.2011-12) assessment proceedings, the assessee failed to prove genuineness of purchases and the dealer. Even the notice sent to dealer U/s. 133(6) of the Act by the Assessing Offer was returned back unserved. Thus, the Assessing Officer made addition of the entire bogus purchases. The assessee filed appeal against assessment order dated 19/09/2016 passed under section 143 (3) r.w.s. 147 of the Income Tax Act, 1961 (in short ‘the Act’). The CIT(A) restricted the addition to 12.5% of bogus purchases. The ld. Departmental Representative prayed for reversing the findings of CIT(A) and restoring the addition made in assessment order.

3.

The submissions made by ld. Departmental Representative heard and orders of authorities below examined. The assessee is engaged in manufacturing of graphite electrodes and other graphite products. During the period relevant to assessment year under appeal the assessee allegedly obtained bogus purchase bills to the tune of Rs.10,95,931/-. Undisputedly, the assessee failed to discharge it’s onus in proving genuineness of purchases and authenticity of the dealer. The Hon'ble Jurisdictional High Court in the case PCIT vs Pramashakti Distributors Pvt. Ltd. in Income Tax Appeal 413 of 2017 decided on 15/7/2019 has held that only profit embedded in bogus purchases can be taxed. The entire alleged bogus purchases cannot be added. I find no error in estimation of profit at 12.5% by the CIT(A). The impugned order is upheld and the appeal by Revenue is dismissed, sans-merit.

4.

In the result, appeal by the Revenue is dismissed.

Order pronounced in the open Court on Monday, the 05th day of April, 2021.

Sd./- (VIKAS AWASTHY) �या�यक सद�य/JUDICIAL MEMBER मुंबई/Mumbai, �दनांक/Dated: 05/04/2021 Vm, Sr. PS (O/S)

आअसं. 4531/मुं/2019 (�न.व.2011-12) (A.Y.2011-12)

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