ITO 27(1)(5), MUMBAI vs. SHRI. JATIN VASANT MADANI, MUMBAI

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ITA 4458/MUM/2019Status: DisposedITAT Mumbai01 April 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, stating that only the profit element embedded in bogus purchases can be taxed, following the jurisdictional High Court's precedent. The addition made by the Assessing Officer was considered excessive.

What were the facts?

The Revenue appealed against the CIT(A)'s order which restricted an addition made for bogus purchases. The Assessing Officer had added the full amount of peak hawala purchases, but the CIT(A) reduced it to 12.5% minus the declared GP.

What were the issues?

Whether the entire amount of bogus purchases, or only the profit element embedded therein, should be added to the assessee's income.

Which sections of the Income-tax Act were involved?

Section 69C

AI-generated summary — verify with the full judgment below

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

Before: SHRI VIKAS AWASTHY

Hearing: 04/01/2021Pronounced: 01/04/2021

आदेश/ ORDER

1.

This Appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals) -26, Mumbai [in short ‘the CIT(A)] dated 30/04/2019 for the assessment year 2009-10.

2.

Shri Sanjay J. Sethi representing the Department submitted that the assessee had indulged in obtaining bogus purchase bills aggregating to आअसं. 4458/मुं/2019 (�न.व.2009-10.) (A.Y.2009-10)

Rs.29,89,160/- from hawala dealers. During assessment proceedings notice under section. 133(6) of the Income Tax Act, 1961 (in short ‘the Act’) were issued to the dealers, the same were returned back unserved except notice issued to one party. However, no confirmations were furnished by the said party. The assessee failed to prove genuineness of purchases and the dealers. The Assessing Officer made addition of the peak hawala purchases i.e. Rs.18,47,147/- as unexplained expenditure under section 69C of the Act. In first appellate proceedings, the CIT(A) restricted the addition to 12.5% minus GP declared. The ld.Departmental Representative submitted that the addition made by the Assessing Officer in respect of bogus purchases was fair and should have been sustained by the CIT(A). The ld. Departmental Representative prayed for reversing the findings of CIT(A) and restoring the addition made in assessment proceedings.

3.

The submissions made by ld. Departmental Representative heard, orders of authorities below examined. The assessee is a dealer of ferrous and non- ferrous metals. The assessee has allegedly made bogus purchases aggregating to Rs.29,89,160/- from three dealers declared as hawala operators by the Sales Tax Department, Government of Maharashtra. Undisputedly, the assessee failed to discharge his onus in proving genuineness of purchases and the authenticity of the dealers. The Assessing Officer made addition of Rs.18,47,147/- in respect of bogus purchases by taking peak of such purchases. The Hon'ble Bombay High Court in the case of PCIT vs Pramashakti Distributors Pvt. Ltd. in Income Tax Appeal 413 of 2017 decided on 15/7/2019 has held that only profit element embedded in bogus purchases can be taxed. The CIT(A)

आअसं. 4458/मुं/2019 (�न.व.2009-10.) (A.Y.2009-10) estimated G.P. at 12.5% of the bogus purchases and restricted the addition to Rs.3,73,645/-. The same has been accepted by the assessee. The addition made by Assessing Officer in respect of bogus purchases was on the higher side and contrary to the law laid down by the Hon'ble Jurisdictional High Court. I find no merit in appeal by the Revenue, hence, 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 Thursday, the 01st day of April, 2021

Sd./- (VIKAS AWASTHY) �या�यक सद�य/JUDICIAL MEMBER मुंबई/Mumbai, �दनांक/Dated: 01/04/2021 Vm, Sr. PS (O/S)

आअसं. 4458/मुं/2019 (�न.व.2009-10.) (A.Y.2009-10)

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