INCOME TAX OFFICER WARD-3(1)(1), MUMBAI vs. M/S. AMAN MARKETING SERVICES PVT. LTD., MUMBAI

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ITA 5024/MUM/2019Status: DisposedITAT Mumbai17 February 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 held that since the sales corresponding to the disputed purchases were not disputed, only the profit element should be taxed. The CIT(A)'s decision to add 12.5% profit, which subsumes other additions like commission, was upheld.

What were the facts?

The assessee company made purchases from parties listed as tainted dealers by the sales tax department. The Assessing Officer added the peak value of these purchases, along with gross profit and commission, to the total income. The CIT(A) restricted the disallowance to 12.5% of the bogus purchases.

What were the issues?

Whether the disallowance for bogus purchases should be restricted to the profit element, and if the CIT(A) was justified in estimating this profit at 12.5%.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147

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Income Tax Appellate Tribunal, VIRTUAL COURT

Before: SHRI M.BALAGANESH, AM & SHRI PAVAN KUMAR GADALE, JM

For Respondent: Shri Sanjay Sethi
Hearing: 15/02/2021Pronounced: 17/02/2021

आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in A.Y.2009-10 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-8, Mumbai in appeal No.CIT(A)-8/IT-289/15-16 dated 27/05/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) by the ld. Income Tax Officer-3 (1)(1), Mumbai (hereinafter referred to as ld. AO).

M/s. Aman Marketing Services Pvt. Ltd.,

2.

The only effective issue involved in this appeal is whether the ld. CIT(A) was justified in restricting the disallowance made on account of bogus purchases to 12.5% of value thereof in the facts and circumstances of the case.

3.

None appeared on behalf of the assessee. We have heard the ld. DR and perused the materials available on record. We find that assessee is a private limited company engaged in the retail trading of various gift items. It is not in dispute that assessee had made certain purchases to the tune of Rs.64,20,454/- from ten parties listed in pages 1 & 2 of the assessment order whose names appear to be tainted dealers in the Sales Tax department website of Government of Maharashtra. Accordingly, the ld. AO sought to add the peak value of the purchases thereon and made an addition of Rs.11,54,999/- as unverifiable purchases while completing the assessment. It is not in dispute that the sales made out of the corresponding purchases are not disputed by the Revenue before us.

1.

3.1. Apart from above, the ld. AO added gross profit @4% on the alleged purchase transactions to the tune of Rs.2,56,818/-. The ld. AO further added the commission for arranging such bogus purchase bills at 1% to the tune of Rs.64,204/- while completing the assessment.

4.

We find that sales made out of purchases have not been disputed by the Revenue before us. Hence, the profit element alone could be brought to tax which was reasonably estimated at 12.5% on the alleged bogus purchases of Rs. 64,20,454/- by the ld. CIT(A) by placing due reliance on the decision of the Hon’ble Gujarat High Court in the case of Simit P Sheth reported in 356 ITR 451. Once the profit

M/s. Aman Marketing Services Pvt. Ltd., element at 12.5% is directed to be added, there cannot be any other addition towards commission and other items as everything gets subsumed in the profit element sought to be added. Hence we do not deem it fit to interfere in the said action of the ld. CIT(A). Accordingly, the grounds raised by the revenue are dismissed.

6.

In the result, appeal of the Revenue is dismissed.

Order pronounced on 17/02/2021 by way of proper mentioning in the notice board.

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