RAWASSA CONSTRUCTION,MUMBAI vs. DCIT CEN CIR -9, MUMBAI

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ITA 26/MUM/2016Status: DisposedITAT Mumbai14 December 2020AY 2010-114 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that only the profit element on bogus purchases should be taxed, not the entire amount. It also noted that the VAT authorities did not mention suspicious dealers in their order, which reduced the disallowance significantly.

What were the facts?

The assessee's appeal concerns bogus purchases amounting to Rs.89,33,527/-, which were added to its income by the AO. The assessee argued that the VAT assessment order, which restricted the disallowance, was not considered.

What were the issues?

Whether the entire amount of bogus purchases should be added to the assessee's income, or only the profit element. The relevance and impact of the VAT assessment order on the income tax assessment.

Which sections of the Income-tax Act were involved?

Section 133A

AI-generated summary — verify with the full judgment below

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

Before: SHRI RAJESH KUMAR & SHRI AMARJIT SINGH

For Appellant: Shri Bharat Kumar, A.R
For Respondent: Shri Manpreet Singh Duggal, D.R
Hearing: 09.12.2020Pronounced: 14.12.2020

O R D E R

Per Rajesh Kumar, Accountant Member:

1.

The present appeal has been preferred by the assessee against the order dated 08.10.2015 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11.

2.

The assessee has raised two ground of appeal and the appeal was adjudicated by the co-ordinate bench of the Tribunal vide order dated 30.10.2018. Now ,the assessee has moved miscellaneous application vide MA No.363/M/2019 arising out of challenging the adjudication of first ground of appeal which was for bogus purchases on the ground that VAT assessment order for the period from 01.04.2009 to 31.03.2010 relevant to A.Y. 20101-11 filed by the 2 M/s. Rawassa Construction assessee has not been considered adjudicating this ground and therefore the coordinate Bench recalled the impugned order to the limit extent of examining the relevance/applicability of VAT assessment order in adjudication of this ground. Therefore, we are only deciding the ground No.1 in the light of the VAT assessment order for A.Y. 2010-11 which was before us adjudication.

3.

The facts in brief are that the assessee was beneficiary of bogus purchase entries to the tune of Rs.89,33,527/- which came to the notice of AO when DDIT (Inv.) conducted a search on the assessee under section 133A of the Act. During the said survey it was found that assessee along with its sister concern M/s. Vasera Consturction was taking accommodation entries in the form of bogus purchase bills from suspicious hawala traders who were declared by the Sales Tax Department, Government of Maharashtra as bogus dealer and consequently the AO added the entire amount to the income of the assessee on the ground that assessee has failed to prove the genuineness of the purchases. Now the Ld. A.R. has contended before us that since the disallowance of VAT has been restricted to Rs.3 lakhs from Rs.69 lakhs and there is no mention by the VAT authorities about the alleged hawala dealers in the order of Ld. FAA (VAT). The Ld. CIT(A) sustained the entire disallowance of purchases on the ground that assessee has failed to prove the genuineness of the purchases.

4.

After hearing both the parties and perusing the material on record, we are of the view that the disallowance of entire

3 M/s. Rawassa Construction purchases and confirmation thereof is not correct as it is only the profit element on the said purchases which are to be brought to tax on the presumption that assessee might have purchased from the grey market. Moreover, VAT assessment order for A.Y. 2010-11 has been examined. We find that the disallowance has been reduced to Rs.3 lakhs from Rs.69 lakhs thereby a substantial relief has been given to the assessee by the Sales Tax Department, Government of Maharashtra and they have nowhere mentioned in the assessment order about the suspicious dealer issuing bills to the assessee. Under these circumstances, we are of the view that it would in the interest of justice and fairplay, if a reasonable percentage of profit is applied to the assess the income embedded in the bogus purchases. Accordingly, we are inclined to set aside the order of Ld. CIT(A) on this issue and direct the AO to apply a percentage of 12.5%. Ground is partly allowed.

5.

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 14.12.2020.

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