ITO, 6(1)(4), MUMBAI vs. M/S BOMBAY OFFSET PVT. LTD., MUMBAI

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ITA 2913/MUM/2019Status: DisposedITAT Mumbai14 December 2020AY 2010-114 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 held that only the profit element embedded in bogus purchases should be brought to tax, as sales were accepted and purchases were not substantiated. The Tribunal found no infirmity in the CIT(A)'s orders.

What were the facts?

The Revenue appealed against the CIT(A)'s order which restricted the disallowance on bogus purchases to 12.5%. The assessee had failed to appear before the Assessing Officer, leading to assessment under section 144 r.w.s. 147 for obtaining accommodation entries.

What were the issues?

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

Which sections of the Income-tax Act were involved?

Section 144,Section 147,Section 143(3)

AI-generated summary — verify with the full judgment below

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

Before: SHRI VIKAS AWASTHY

For Respondent: Shri Ajay Pratap Singh

आदेश/ ORDER

1.

These two appeals by the Revenue are directed against the orders of Commissioner of Income Tax (Appeals)-12, Mumbai [in short ‘the CIT(A)’] for the assessment years 2010-11 and 2011-12 respectively. Both the impugned orders are of even date i.e. 11/01/2019. Since, the issue involved and the grounds of appeal in (A.Y.2010-11) (A.Y.2011-12) both these appeals are identical, these appeals are taken up together for adjudication and are disposed off by this common order.

2.

The brief facts of the case as emanating from records are: The assessee is engaged in the business of printing. The assessment for assessment years 2010-11 and 2011-12 in the case of assessee was reopened on the basis of information received from Sales Tax Department, Government of Maharashtra by DGIT(Investigation), Mumbai that the assessee had obtained accommodation entries from M/s. Padmavati Enterprises, a declared hawala dealer as under:

For Assessment Year 2010-11 - Rs. 11,43,177/- For Assessment Year 2011-12 - Rs. 6,68,551/- The assessee failed to appear before the Assessing Officer despite service e of notice, hence, the Assessing Officer completed the assessment for the impugned assessment years under section 144 r.w.s. 147 of the Income Tax Act, 1961 ( in short ‘the Act’). In the absence of any documentary evidence to prove the genuineness of the purchases, the Assessing Officer made addition of the entire bogus purchases in the respective assessment years. Aggrieved by the assessment orders dated 12/02/2016 passed under section 143(3) r.w. 144 r.w. 147 of the Act, the assessee filed appeals before the CIT(A) for the respective assessment years. The CIT(A) vide separate orders for assessment year 2010-11 and 2011-12, restricted the disallowance on bogus purchases to 12.5%. Against the aforesaid 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 (A.Y.2010-11) (A.Y.2011-12)

exception specified in para 10(e) of Circular No. 03 of 2018 dated 11/07/2018 and amended on 20/08/2018.

During the assessment proceedings the assessee failed to appear before the Assessing Officer. No documents were filed by the assessee to prove genuineness of the purchases. Even before CIT(A) the assessee failed to prove trail of goods. Further the assessee could not produce the dealer from whom alleged purchases were made. The ld. Departmental Representative prayed for reversing the finding of CIT(A) and restoring the disallowance of bogus purchases as made in the assessment order.

4.

Submissions made by ld. Departmental Representative heard and orders of authorities below examined for both the impugned assessment years. The addition in respect of bogus purchases have been made in the impugned assessment years for identical reasons. The assessee failed to appear before the Assessing Officer in assessment proceedings, therefore, the assessment was completed by the Assessing Officer after invoking the provisions of section 144 of the Act. Undisputedly the sales declared by the assessee were accepted by the Assessing Officer. Without corresponding purchases there cannot be sales, therefore, in such like bogus 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 orders, hence, the same are upheld and appeals by the Revenue for assessment year 2010-11 and 2011-12 are dismissed.

5.

No appeal/cross objections filed by the assessee against the orders of CIT(A) has been brought to the notice of Bench. In case any appeal/cross objections by the assessee against impugned orders of CIT(A) are noticed, then this order may be (A.Y.2010-11) (A.Y.2011-12)

recalled and the cross appeals may be listed together for disposal by a common order.

6.

In the result, both appeals by the Revenue are dismissed.

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

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