ITO 28 (3)(2), MUMBAI vs. SHARWANSINGHATAR SINGH CHATARSINGH CHUNDAWAT, MUMBAI

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ITA 2671/MUM/2019Status: DisposedITAT Mumbai01 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 upheld the CIT(A)'s decision to restrict the disallowance to 12.5% of bogus purchases. It noted that since the corresponding sales were not doubted, the entire purchases could not be added as income.

What were the facts?

The Assessing Officer added the entire purchases as unexplained after the assessee failed to produce parties from whom purchases were made. The CIT(A) restricted the disallowance to 12.5% of the purchases, considering the profit element.

What were the issues?

Whether the entire amount of bogus purchases can be added as income when corresponding sales are not doubted, or only the profit element should be taxed.

Which sections of the Income-tax Act were involved?

Section 69C

AI-generated summary — verify with the full judgment below

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

Before: SHRI MAHAVIR SINGH & SHRI MANOJ KUMAR AGGARWAL

For Appellant: Shri T.S. Khalsa
For Respondent: Shri Shashank A. Mehta
Hearing: 01/02/2021Pronounced: 01/02/2021

This appeal by the Revenue is arising out of the order of CIT(A)-26, Mumbai in Appeal no. CIT(A)-26/IT/10145/2014-15 dated 27.02.2019. The assessment was framed by the Income Tax Officer-28(3)(2), Mumbai under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year 2009-10 vide order dated Nil.

2. The only issue in this appeal of Revenue is against the order of CIT(A) restricting the disallowance of bogus purchases to the extent of 12.5% as against 100% made by the Assessing Officer. For this, the Revenue has raised the following two effective grounds :-

Sharwansinghatar Singh Chatarsingh Chundawat “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the A.O to restrict the addition of bogus purchases to 12.5% as against 100% addition made by the Assessing Officer on account of bogus purchases without appreciating the fact that parties from whom these purchases were made proven accommodation entry providers, as concluded by Sales Tax Authorities pursuant to the investigation carried out by them?

2.

Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the latest Apex Court decision in the case of N.K. Proteins Ltd Vs DCIT (769 of 2017), wherein the Hon'ble Supreme Court has confirmed 100% addition made on account of bogus purchases?”

3.

We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the Assessing Officer received information from DGIT (Investigation), Mumbai that assessee has obtained bogus purchase bills from Skand Industries of Rs.13,275/- and J.K. Agency of Rs.4,74,017/-. Thus, the total bogus purchase disclosed was Rs.4,87,292/-. The Assessing Officer asked the assessee to produce these parties for confirmation, but he failed to do so. Accordingly, the Assessing Officer added the entire purchases of Rs.4,87,292/- as unexplained under Section 69C of the Act. The CIT(A) noted that these are accommodation entries, but once the sales made out of the same are not doubted, the entire purchases cannot be disallowed. He also noted that the assessee has produced documentary evidences such as purchase bills, payment by cheque and also furnished details of purchases and corresponding sales. The CIT(A), considering the decision of Hon'ble Gujarat High Court in the case of CIT vs Simit P. Sheth, 356 ITR 451 (Gujarat), held that the entire purchases cannot be treated as income of the assessee and only the profit element can be added. Therefore, following the Hon'ble Gujarat High Court decision in the case of Simit P. Sheth (supra), the Sharwansinghatar Singh Chatarsingh Chundawat CIT(A) estimated the profit at 12.5% of the bogus purchases. Aggrieved, Revenue came in appeal before the Tribunal.

4.

From the above facts, it is clear that the assessee provided details of purchases and corresponding sales, purchase bills, payment by cheques, etc. Once the sales are not doubted by the Assessing Officer, the entire purchases cannot be added. Hence, we find no infirmity in the order of CIT(A) restricting the profit rate at 12.5% of the bogus purchases. Accordingly, we confirm the order of CIT(A) and appeal of the Revenue is dismissed.

5.

In the result, appeal of the Revenue is dismissed.

Order pronounced in the open court on 1st February, 2021.

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