ITO-17(3)(5), MUMBAI vs. UDAY TRADING CORPORATON, MUMBAI

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ITA 2906/MUM/2019Status: DisposedITAT Mumbai14 December 2020AY 2011-123 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 order, stating that since the assessee's sales were not doubted and sales cannot exist without corresponding purchases, only the profit element embedded in the bogus purchases should be taxed.

What were the facts?

The Revenue appealed against the CIT(A)'s order which restricted the disallowance of alleged bogus purchases to 12.5%. The Assessing Officer had initially added the entire amount of Rs. 4,200/- for bogus purchase bills obtained by the assessee.

What were the issues?

Whether the entire amount of alleged bogus purchases should be disallowed or only the profit element embedded therein, when the assessee's sales are accepted.

Which sections of the Income-tax Act were involved?

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

For Appellant: Shri Rajesh Shah
For Respondent: Shri Ajay Pratap Singh, Shri Rajesh Shah

आदेश/ ORDER

1.

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-28, Mumbai (in short ‘the CIT(A)’) dated 08/02/2019 for the assessment year 2011-12.

2.

The brief facts of the case as emanating from records are: The assessee is engaged in trading of hardware, tools, ball bearing and other allied products. On the basis of information received from Sales Tax Department, Government of (A.Y.2011-12) Maharashtra by DGIT(Investigation), Mumbai, the assessment for assessment year 2011-12 in the case of assessee was reopened. As per information received, the assessee allegedly obtained bogus purchase bills amounting to Rs.4200/- from M/s. Mahavir Trading, one of the suspicious dealers engaged in providing accommodation entries. The Assessing Officer in reassessment proceedings made addition of the entire alleged bogus purchases. Aggrieved by the assessment order dated 30/11/2016, passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 ( in short ‘the Act’), the assessee filed appeal before the CIT(A). The CIT(A) after examining the facts, restricted the disallowance to 12.5%. Against the findings of CIT(A), the Revenue is in appeal.

3.

Shri Ajay Pratap Singh, representing the Department submitted that though the tax effect involved in the appeal is less than the monetary limit specified vide CBDT Circular No. 17/2019, dated 08-08-2019 but the case of assessee falls under exception specified in para 10(e) of Circular No. 03 of 2018 dated 11/07/2018 and amended on 20/08/2018. The ld.Departmental Representative submitted that the assessee had obtained accommodations entries from declared hawala dealer. During the assessment proceedings the assessee failed to prove genuineness of the purchases, therefore, the Assessing Officer made addition of the entire such bogus purchases. The ld.Departmental Representative prayed for reversing the findings of CIT(A) and restoring the finding of Assessing Officer.

4.

Per contra, Shri Rajesh Shah, appearing on behalf of the assessee vehemently defended the order of CIT(A) in restricting the disallowance on alleged bogus purchases to 12.5%. The ld.Authorized Representative of the assessee submitted that sales made by the assessee have not been doubted by the Assessing Officer, therefore, the entire alleged bogus purchases cannot be added. Without corresponding purchases there cannot be sales. The ld.Authorized Representative of the assessee prayed for confirming the findings of CIT(A) and dismissing the appeal of Revenue.

(A.Y.2011-12) 5. Both sides heard, orders of authorities below examined. The assessee is stated to have obtained bogus purchase bills amounting to Rs.4,200/- from hawala dealers. The Assessing Officer made addition of the entire bogus purchases. The CIT(A) restricted the disallowance to 12.5% of such bogus purchases. Undisputedly, the Revenue accepted the sales declared by the assessee. Without corresponding purchases there cannot be sales, therefore, in such like suspicious transactions it is only the profit element embedded in bogus purchases that has to be brought to tax.[ Re.PCIT vs. Paramsakhti Distributors Pvt. Ltd., Income Tax Appeal No.413 of 2017 decided on 15/07/2019 by Hon'ble Bombay High Court]. I find no infirmity in the impugned order, hence, the same is upheld and appeal by the Revenue is dismissed.

6.

In the result, appeal by the Revenue is dismissed.

Order pronounced on Monday the 14th day of December, 2020.

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