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Income Tax Appellate Tribunal, SMC Bench, Mumbai
Before: Shri Shamim Yahya
This appeal filed by the assessee is directed against the order of the CIT(A)-53, Mumbai dated 20.12.2018 and it relates to A.Y. 20106-11.
The assessee is aggrieved that the learned CIT(A) has erred in not condoning the delay in filing the appeal and that the same time sustaining 25% percent disallowance on account of bogus purchases, vide order dated 20.12.2018 as against 12.5% done by the Assessing Officer pertaining to assessment year 2010-11.
Brief facts of the case are that assessee in this case is engaged in the business of Steele trading. The assessment in this case was reopened upon receipt of information from the Sales Tax Department that assessee has made bogus purchases. The assessee submitted the purchase vouchers and the payments were made through banking channel. However the suppliers were not produced before the Assessing Officer. Sales in this case were not doubted. The Income Tax Officer in this case has made
M/s. Vitrag Steel 12.5% addition on account of bogus purchase resulting in disallowance of `7,88,781/-.
Upon assessee’s appeal learned CIT(A) noted that there was a delay in filing the appeal. Without even bothering to mention the quantum of delay in his order, the learned CIT(A) proceeded to hold that delay was not condoned. After holding that he was not condoning the delay and accordingly the appeal remained unadmitted, he proceeded to decide upon the merits of the case. He concluded that 25% disallowance on account of bogus purchase is confirmed.
Against above order assessee is in appeal before the ITAT. I have heard learned D.R. and perused the records. Up on careful consideration I find that assessee has provided the documentary evidence for the purchase. Adverse inference has been drawn due to the inability of the assessee to produce the suppliers. I find that in this case the sales have not been doubted. It is settled law that when sales are not doubted, hundred percent disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from honourable jurisdictional High Court decision in the case of Nikunj Eximp Enterprise (in Writ Petition No. 2860, order dated 18.06.2014). In this case the honourable High Court has upheld hundred percent allowance for the purchases said to be bogus when sales are not doubted.
I find that in the present case the Assessing Officer has made a disallowance of 12.5% of the bogus purchase. Upon assessee's appeal learned CIT(A) has held that he was not condoning the delay in filing the appeal without even mentioning the number of days for which condonation was sought. In my considered opinion this order of CIT(A) reflects complete non-application of mind.
Thereafter having held that he was not condoning the delay and hence the appeal remained unadmitted the learned CIT(A) proceeded to adjudicate upon the merits of the case. It has been already held by higher
M/s. Vitrag Steel courts that once the delay was not being condoned, the merits of the appeal cannot be gone into. This order by the learned CIT(A) fails on this account also. Thereafter learned CIT(A) on the merits of the case has held that he was sustaining 25% disallowance done by the Assessing Officer. This is also another non-application of mind and virtually amounts to enhancement. As per law enhancement by the learned CIT(A) without notice to the assessee is not sustainable. Hence order of learned CIT(A) is liable to be set aside this account also.
Accordingly in the background of aforesaid discussion and precedent I set aside the order of learned CIT(A) and direct that the addition in this case be deleted.
In the result, the appeal filed by the stands allowed.