What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to restrict the addition by estimating the profit at 12.5% of the bogus purchases. This estimation was found to be in line with High Court precedents.

The Revenue appealed against the CIT(A)'s order which restricted an addition of bogus purchases to 12.5%. The assessee had made purchases from a declared hawala operator and failed to prove the genuineness of these transactions.

What were the issues?

Whether the CIT(A) was justified in restricting the addition for bogus purchases to an estimated profit margin instead of the full amount.

ITO vs Shri Bhagwanji Khimji Nandu | ITAT Mumbai 2021

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

Before: VIKAS AWASTHY & SHRI N.K.PRADHAN

For Respondent: Ms. Smita Verma

Hearing: 08/03/2021Pronounced: 11/03/2021

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-55, Mumbai ( in short ‘the CIT(A)’) dated 08/05/2019 for the assessment year 2012-13.

2 आअसं. 5241/मुं/2019 (�न.व. 2012-13) (A.Y.2012-13 2. Ms. Smita Verma representing the Department submitted that the assessee is engaged in the business of printing and publishing. During the period relevant to the assessment year under appeal, the assessee made bogus purchases to the tune of Rs.3,58,015/- from M/s. Padmavati Enterprises, a declared hawala operator by the Sales Tax Department, Government of Maharashtra. During assessment proceedings, the assessee failed to prove genuineness of the purchases and the aforesaid dealer. No purchases bills, transportation bills, delivery challan or confirmations from the alleged supplier were furnished by the assessee. The only document produced by the assessee before the Assessing Officer was ledger accounts and statements indicating payments made through banking channel. In the absence of cogent evidences the Assessing Officer made addition of the entire bogus purchases. In first appeal, the CIT(A) restricted the addition to 12.5%. Hence, the present appeal by Revenue.

We have heard the submissions made by ld.Departmental Representative and have examined orders of authorities below. The assessee has allegedly made bogus purchases from suspicious hawala operator. The assessee has failed to substantiate genuineness of the dealer and the alleged bogus purchases. The Assessing Officer made addition of entire such purchase. In first appeal, the CIT(A) after examining the facts of the case and the submissions of the assessee, restricted the addition to Rs.44,751/- i.e. by estimating G.P @ 12.5% of the bogus purchases. It is an undisputed fact that the turnover declared by the assessee has not been disputed by the Revenue. The estimation of profit by CIT(A) is in line with the decision of Hon'ble Bombay High Court in the case of PCIT vs. Paramsakhti Distributors Pvt. Ltd. in Income Tax Appeal No.413 of 2017 decided on 15/07/2019. In our considered view, the order of CIT(A) warrants no interference and we concur with the same. The appeal by Revenue is dismissed being devoid of merit.

3 आअसं. 5241/मुं/2019 (�न.व. 2012-13) (A.Y.2012-13 4. In the result, appeal by Revenue is dismissed.

Order pronounced in the open court on Thursday,the 11th day of March, 2021.

INCOME TAX OFFICER-17(1)(2), MUMBAI vs. SHRI BHAGWANJI KHIMJI NANDU, MUMBAI

What did the Tribunal hold?

What were the facts?

What were the issues?

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