ASST. CIT-11(1)(1), MUMBAI vs. M/S RACHETA INTERIORS PVT LTD., MUMBAI

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ITA 4541/MUM/2019Status: DisposedITAT Mumbai18 January 2021AY 2011-124 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 the profit element embedded in the bogus purchases, estimating it at 12.5%. The Tribunal agreed that only the profit, not the entire amount, should be taxed in such cases.

What were the facts?

The Revenue appealed against the CIT(A)'s order which restricted the addition for bogus purchases to 12.5%. The assessee, an interior decorator and civil contractor, had obtained bogus purchase bills from a hawala dealer. The Assessing Officer made an addition of the entire amount, but the CIT(A) reduced it to 12.5% of the bogus purchases.

What were the issues?

The primary issue was whether the entire amount of bogus purchases should be added to the income or only the profit element embedded therein. The appeal also concerned the quantum of addition for such purchases.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

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

Before: SHRI VIKAS AWASTHY & SHRI S.RIFAUR RAHMAN.

For Appellant: Shri Devendra Jain
For Respondent: Shri Sanjay J. Sethi

Assessee by : Shri Devendra Jain Revenue by : Shri Sanjay J. Sethi सुनवाई की तारीख/ : 11/01/2021 Date of Hearing घोषणा की तारीख / : 18/01/2021 Date of Pronouncement आदेश/ ORDER PER VIKAS AWASTHY, JM:

This appeal by the Revenue is against the order of Commissioner of Income Tax (Appeals)-18, Mumbai ( in short ‘the CIT(A)’) dated 26/04/2019 for the assessment year 2011-12.

The brief facts of the case as emanating from records are : The assessee 2. is engaged in the business of interior decorators and civil contractor. The assessee filed its return of income for the impugned assessment year on 15/09/2011 declaring total income of Rs.41,96,390/-. The return of the assessee was processed under section 143(1) of the Income Tax Act, 1961 ( in short ‘the Act’). Subsequently, on the basis information received from the Sales Tax Department, Government of Maharashtra that assessee has obtained bogus purchase bills amounting to Rs.5,48,211/- from M/s.Mahalaxmi Corporation, a declared hawala dealer, the assessment for assessment year 2011-12 was reopened. In reassessment proceedings, the assessee was asked to produce documents to substantiate genuineness of purchases. The assessee could neither produce any document nor confirmation from supplier of the goods to prove genuineness of purchases. The Assessing Officer made addition of the entire alleged bogus purchases. Aggrieved by the assessment order dated 31/08/2016 passed under section 143(3) r.w.s. 147 of the Act, the assessee filed appeal before the CIT(A). The CIT(A) after examining the facts of case and after considering various decisions of higher forums restricted the addition to 12.5% of the bogus purchases. Against the finding of the CIT(A) the Revenue is in appeal.

3.

Shri Sanjay J. Sethi, representing the Department vehemently defended the assessment order and prayed for reversing the finding of CIT(A) in restricting the addition to 12.5% of bogus purchases. The ld.Departmental Representative placed reliance on the decision of Hon'ble Supreme Court of India in the case of N.K. Proteins Vs. DCIT in SLP No.(C) 769 of 2017 decided on 16/01/2017.

4.

Shri Devendra Jain, appearing on behalf of the assessee vehemently defended the impugned order and prayed for dismissing the appeal by the Revenue. The ld.Authorized Representative of the assessee submitted that the turnover of the assessee has been accepted by the Department. The Assessing Officer has not rejected the books of assessee . Therefore, entire alleged bogus purchases cannot be added. It is only the profit element, if any embedded in such purchases that can be added. The CIT(A) has restricted the addition to 12.5% of alleged bogus purchases, the assessee has accepted the same.

5.

Both sides heard, orders of authorities below examined. The solitary issue raised in the present appeal by the Revenue is the relief granted to the assessee in respect of bogus purchases by the CIT(A). Undisputedly, the turnover declared by the assessee has been accepted by the Revenue. Without inputs the assessee could not have performed the job work. Under such like alleged bogus transactions, it is only the profit element embedded in such transaction that has to be brought to tax. (RE: PCIT vs. Paramshakhti Distributors Pvt. Ltd. in Income Tax Appeal No.413 of 2017 decided on 15/07/2019 by Hon'ble Bombay High Court). In the present case, CIT(A) has restricted the addition by estimating G.P at 12.5%. The assessee has accepted the same. We concur with the findings of CIT(A). Accordingly, the same are upheld and the appeal of the Revenue is dismissed being devoid of any merit.

6.

In the result, appeal by the Revenue is dismissed.

Order pronounced in the open Court on Monday, the 18th day of January, 2021.

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