SHRI. ROHIT MEHTA,MUMBAI vs. ITO 17(3)(2), MUMBAI

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ITA 173/MUM/2019Status: DisposedITAT Mumbai12 March 2021AY 2008-094 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal set aside the CIT(A)'s order and directed the AO to restrict disallowances by estimating profit at 5% of the disputed purchases, considering the assessee provided bank statements for cheque payments but lacked other supporting documents.

What were the facts?

The assessee, a broker in Iron & Steel, declared an income of Rs. 8,77,296/-. The AO reopened the assessment based on information that the assessee obtained accommodation entries amounting to Rs. 98,60,943/- from Trishul Traders.

What were the issues?

Whether the disallowance of purchases made through accommodation entries was justified, and if so, what was the appropriate profit estimation for such purchases.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148

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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI

Before: SHRI VIKAS AWASTHY & SHRI N.K. PRADHAN

For Respondent: Shri Sanjay J. Sethi, DR
Hearing: 10/03/2021Pronounced: 12/03/2021

ORDER PER N.K. PRADHAN, A.M. The captioned appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-28, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) r.w.s. 147 of the Income Tax Act 1961, (the ‘Act’).

Though the case was fixed for hearing on 15.01.2020, 03.07.2020, 14.01.2021 & 10.03.2021, neither the assessee nor his Authorized Representative (AR) appeared before the Tribunal on above dates. As there is Shri Rohit Mehta non-compliance by the assessee, we are proceeding to dispose-off this appeal after examining the materials available on record and after hearing the Ld. Departmental Representative (DR).

2.

Briefly stated the facts of the case are that the assessee filed his return of income for the Assessment Year (AY) 2008-09 on 30.09.2008 declaring total income of Rs.8,77,296/-. The assessee is a broker in Iron & Steel. On receipt of information from the Director General of Income tax (Inv.) that the assessee had obtained accommodation entries from Trishul Traders amounting to Rs.98,60,943/-, the Assessing Officer (AO) issued notice u/s 148 for reopening the assessment. During the course of re-assessment proceedings, the assessee submitted before the AO that the purchase made from the above party is genuine. In this regard, he filed ledger copies of the purchases made and stated that the payments have been made through cheques only. However, the AO was not convinced with the above submissions of the assessee, on the ground that except cheque payments, no other documents such as delivery challans, lorry receipts, transportation details etc., were produced. Considering the facts that since the assessee has provided bank statement showing cheque payments to the said party, the AO came to the finding that the assessee must have made the purchases from open market from some parties best known to him. Follwing the decision of the Hon’ble Gujarat High Court in CIT vs. Simit P.Sheth 355 ITR 290, the Ld.CIT(A) estimated the profit @12.5% on the alleged bogus purchases of Rs. 98,60,943/-, which comes to Rs.12,32,618/-.

In appeal, the Ld.CIT(A), vide order dated 02.11.2018 confirmed the 3. above estimation made by the AO.

Shri Rohit Mehta 4. Before us, the Ld. DR submits that the order of the Ld.CIT(A), which is reasonable may be affirmed.

We have heard the Ld. DR and perused the relevant materials available on record. In the present case, the assessee is a broker in Iron & Steel. As mentioned earlier, the AO has recorded in his assessment order detailed dated 10.02.2016 that the assessee has provided the bank statement showing cheque payments to the said party. However, the assessee failed to file before the AO documents such as delivery challans, lorry receipts, transportation details.

Considering the nature of the business of the assessee and facts and circumstances of the case, we set aside the order of the Ld.CIT(A) and direct the AO to restrict the disallowances by estimating profit @5% of the disputed purchases of Rs.98,60,943/-.

5.

In the result, appeal is partly allowed.

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