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Income Tax Appellate Tribunal, MUMBAI “SMC-I” BENCH, MUMBAI
Per Pramod Kumar, VP: 1. By way of this appeal, the Assessing Officer has challenged correctness of the order dated 25.01.2019 passed by the learned CIT(A)-26, Mumbai in the matter of assessment u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961, for the assessment year 2010-11.
Grievance raised by the assessee are as follows : (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 A. O., relying on the decision of Hon'ble Gujarat High Court in the case of CIT Vs Simit P Seth, 356 ITR 451"? (2) "Whether on the facts and in tne 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"?
Assessment Year: 2010-11 Page 2 of 4
(3) The appellant prays that the order of Ld.CIT(A) on the above grounds be reversed and that of the Assessing officer be restored. (4) The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.
Having heard the rival contentions and having perused the material on record, I see no reasons to interfere in the matter inasmuch as the learned CIT(A) has merely followed the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Seth [2013] 356 ITR 451 (Guj) and the assessee’s reliance on the Hon'ble Supreme Court’s dismissal of SLP in the case of N. K. Proteins Ltd. vs. DCIT [2017] 84 taxmann.com 195 (SC) does not dilute the law so laid down by the Hon’ble Gujarat High Court in Simit P. Seth’s case (supra). The ld. CIT(A) is, therefore, quite justified in his conclusions as follows:
I have considered the facts of the case and the appellant's submissions. 6.1. Against Ground No. 1, 2 & 4 no specific submission were made in the written reply and also at the time of hearing. Therefore, these grounds of appeal
s are 'Dismissed.'
7. Ground No. 3 of the appeal is against addition of Rs. 15,14,B69/- as unexplained expenditure U/S.69C of the Act. As per the investigations carried out by the Sales Tax Authorities, the aforementioned parties were found to be involved in giving accommodation entries only without actually supplying the goods. The logical inference is that the purchases made by the appellant would also be in the nature of accommodation entries only. To verify the same, the AO had made enquiries by issuing notices u/s 133(6) which were returned unserved by the postal authorities. This party was found to be non existent at the address given by the appellant. The appellant also failed to provide the latest address of the party. During the scrutiny assessment the appellant furnished details of purchases and corresponding sales. However, the appellant could not produce the party before the AO inspite of opportunity being given. The appellant also failed to produce delivery challans or transportation details. The onus of proving the genuineness of such purchases is on the appellant which the appellant had not been able to discharge fully. When the hawala party had admitted on oath that it had given accommodation entries only without actually supplying the goods, the genuineness of purchases made from these parties will have to be considered taking this into consideration while examining the documentation submitted by the appellant in support of its claim. The documentary evidences such as purchase bills, payments by cheques, etc. would all have been orchestrated to present a facade of genuineness and does not necessarily mean that the purchases from these parties are genuine. The Courts have held that payment by cheque by itself is not sacrosanct so as to prove genuineness of purchases when the surrounding circumstances are suspect. However, the appellant has shown onward sales which has not been doubted by the Assessing Officer. Since there can be no sales without corresponding purchases, the only logical explanation is that the appellant would have made purchases from undisclosed parties in the grey market at lower rates and purchases were shown as being made from the impugned parties to suppress its profits.. In such a situation, the various Courts including the Hon'ble Gujarat High Court in the case of CIT vs Simit P. Sheth, 356 1TR 451 have held that not the entire purchases but only the profit element embedded in these purchases was to be disallowed.The Hon'ble Gujrat High Court in this case has held that profit margin of 12.5% of the bogus purchases will be reasonable. Respectfully following the Order in the case of Simit P. Sheth the addition is restricted to 12.5% of the bogus purchases of Rs. 15,14,869/-. This ground of appeal is 'Partly Allowed1.
Assessment Year: 2010-11 Page 3 of 4 8. Ground No 5 of the appeal is of general nature and the option mentioned therein was not exercised by the appellant. The ground is of academic in nature and no decision is required. For statistical purpose, this should be treated as 'Dismissed.'
I approve the conclusions so arrived at by the ld. CIT(A) insofar as grievances raised against the same, by the assessee are rejected.
In the result, the appeal is dismissed. Order pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details on the notice board.