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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
ORDER PER RAVISH SOOD, J.M:
The present appeal filed by the revenue is directed against the order passed by the CIT(A)-18, Mumbai, dated 09.04.2019, which in turn arises from the assessment order passed by the A.O under Sec. 143(3)r.w.s 147 of the Income Tax Act, 1961 (for short „Act‟) dated 30.12.2017. The revenue has assailed the impugned order on the following grounds of appeal before us:
“1. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in restricting the addition to @12.5% of total bogus purchases and computing the profit for the purpose of section 28 of the I.T. Act, 1961 taking in to consideration the bogus bills against which no goods have been received.
Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the addition to @12.5% of total bogus purchases in presuming that the purchase have been made from unknown parties whereas bills have been received from hawala dealer.
3. Ld. CIT(A) erred in restricting the addition to @12.5% of total bogus purchases that purchases have been made from unknown parties without clarification how the payment was made and whether section 69 of the I.T. Act, 1961 will be applicable or not.
4. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in not considering the order of the Hon'ble supreme court in the case M/s N.K. Protein Ltd Vs DCIT(SLA-CC Nos. 769 of 2017 dt. 16.01.2017) , which is on the similar issue of bogus purchases and when the apex court order was already the law of the land when the Ld. CIT(A) has pronounced its order on 09.04.2019. 2 ACIT-19(3) Vs. M/s Vishisht Exports
Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred by not following the Hon'ble Gujrat High Court decision in the case of CIT vs. N K Industries (In Tax Appeal No. 240 of 2009 vide order dated 26.02.2016) wherein 100% of the bogus purchase was held liable to be added in the hands of the assessee reversing the order passed by the Hon'ble ITAT restricting addition to 25%. The appellant craves leave to amend or alter or add a new ground which may be necessary.” 6. 2. Briefly stated, the assessee firm had filed its return of income for A.Y. 2010-11 on 28.09.2010, declaring a total loss of Rs. 11,46,670/-. The return of income was initially processed as such under Sec. 143(1) of the Act. Subsequently, on the basis of information received from the DGIT(Inv.), Mumbai, that the assessee as a beneficiary had obtained accommodation purchase bills, its case was reopened under Sec. 147 of the Act.
During the course of the assessment proceedings, it was observed by the A.O that the assessee had claimed to have made purchases aggregating to Rs.7,25,920/- from the following two parties which as per the information received from the DGIT(Inv.), Mumbai, had been blacklisted by the Sales Tax Department:
Sr. No. Name of the assessee Amount (Rs.) 1. Ritesh Corporation 4,43,040/- 2. Padmavat Dyes & Chemicals 2,82,880/- Total 7,25,920/- As the assessee failed to substantiate the genuineness and veracity of the impugned purchase transactions, the A.O added the entire value of bogus purchases of Rs.7,25,920/- to its returned income. Accordingly, the A.O vide his order passed under Sec. 143(3) r.w.s 147, dated 30.12.2017 assessed the returned loss of the assessee at Rs.(-) 4,20,750/-.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). Observing, that though the assessee had failed to substantiate the authenticity of the impugned purchase transactions to the hilt, but as the consumption/sales of the goods under consideration had not been doubted, the CIT(A) held a conviction that the addition w.r.t the impugned purchases was liable to be restricted only to the extent of the profit which the assessee would had made by carrying out such impugned purchases from the open/grey market. Accordingly, the CIT(A) restricted the addition in the hands of the assessee to the extent of 12.5% of the aggregate value of the impugned purchases.