INCOME TAX OFFICER-32(2)(1), MUMBAI vs. SHRI INAMULHAQUE HAYATULLAH KHAN, MUMBAI

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ITA 5374/MUM/2019Status: DisposedITAT Mumbai12 March 2021AY 2009-103 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 to restrict the addition to 12.5% of the bogus purchases. It agreed that only the profit embedded in such transactions should be taxed, and the CIT(A)'s estimation was reasonable.

What were the facts?

The Revenue appealed against the CIT(A)'s order reducing the addition on bogus purchases from 30% to 12.5%. The Assessing Officer had reopened the assessment based on information about bogus purchase bills obtained from hawala dealers.

What were the issues?

Whether the estimation of profit on bogus purchases by the Assessing Officer was excessive, and if the CIT(A) was justified in reducing it.

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

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

Before: VIKAS AWASTHY & SHRI N.K.PRADHAN

For Appellant: Ms. Priyanka Jain
Hearing: 10/03/2021Pronounced: 12/03/2021

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-42, Mumbai ( in short ‘the CIT(A)’) dated 28/05/2019 for the assessment year 2009-10.

2.

Shri Sanjay J. Sethi representing the Department submitted that on the basis of information received by the DGIT(Invn) from the Sales Tax Department, Government of Maharashtra, that the assessee has obtained bogus purchase bills

2 आअसं. 5374/मुं/2019 (�न.व. 2009-10) (A.Y.2009-10) from various hawala dealers(four) aggregating to Rs.12,47,569/- the assessment for assessment year 2009-10 was reopened. Since, the assessee failed to discharge his onus in proving genuineness of purchases and the suppliers of the goods, the Assessing Officer concluded that the purchases from the suspicious dealers are bogus. Even notices issued under section 133(6) of the Income Tax Act, 1961 ( in short ‘the Act’), to the suppliers on the address furnished by the assessee were received back unserved with postal remarks ‘left’/’not known’. The Assessing Officer in line with the decision rendered in the case of CIT vs. Simit P. Sheth 356 ITR 451(Guj) made addition of the profit embedded in the bogus transactions. The Assessing Officer made addition of Rs.3,74,271/- by estimating profit @30% on bogus transactions. The assessee filed appeal against the assessment order dated 10/03/2015 passed under section 143(3) r.w.s. 147 of the Act. The First Appellate Authority in principle concurred with Assessing Officer, that the assessee has indulged in bogus transactions, however, the CIT(A) reduced the estimated profit to 12.5%. The ld.Departmental Representative submitted that estimation of profit by Assessing Officer was fair and reasonable, therefore, the same be restored. The ld.Departmental Representative further submitted that though the tax effect involved in the appeal is less than the monetary limit specified vide CBDT Circular No. 17/2019, dated 08-08-2019 but the case of assessee falls under exception specified in para 10(e) of Circular No. 03 of 2018 dated 11/07/2018 and amended on 20/08/2018.

3.

Per contra, Ms. Priyanka Jain appearing on behalf of the assessee supported the findings of CIT(A) . The ld.Authorized Representative of the assessee submitted that the assessee is engaged in the business of trading of iron and steel. The profit estimated by the Assessing Officer on alleged bogus transactions is very much on the higher side. Though the G.P estimated by CIT(A) is also on the higher side but due to smallness of the amount the assessee is not contesting the same. The ld.Authorized Representative of the assessee prayed for confirming the findings of CIT(A).

3 आअसं. 5374/मुं/2019 (�न.व. 2009-10) (A.Y.2009-10) 4. Both sides heard, orders of authorities below examined. Undisputedly, assessee has failed to discharge his onus in proving genuineness of purchases and the suppliers of the goods. The Hon'ble Jurisdictional High Court in the case of PCIT vs. Paramshakhti Distributors Pvt. Ltd. in Income Tax Appeal No.413 of 2017 decided on 15/07/2019 has held that in such like transactions it is only profit embedded in the transactions that has to be brought to tax. The estimation of G.P at 30% by the Assessing Officer on bogus transactions is very much on the higher side. The CIT(A) after examining the facts of the case restricted the addition to 12.5% on bogus purchases. We find no reason to interfere with the findings of CIT(A), hence, the same are upheld. The appeal by the Revenue is without any merit, ergo, dismissed.

5.

In the result, appeal by the Revenue is dismissed.

Order pronounced in the open court on Friday, the 12th day of March, 2021.

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