ITO 29(3)(1), MUMBAI vs. SHRI. SANJAY RAMCHANDRA SHAH, MUMBAI

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ITA 4022/MUM/2019Status: DisposedITAT Mumbai03 December 2020AY 2010-113 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 concurred with the CIT(A)'s decision, stating that since the Assessing Officer accepted the assessee's sales, the entire bogus purchases could not be added. Only the profit element embedded in such transactions should be taxed.

What were the facts?

The assessee, engaged in manufacturing and trading school bags, had their assessment reopened based on information about obtaining bogus purchase bills amounting to Rs. 1,47,656/- from a declared hawala operator. The Assessing Officer added the entire amount, but the CIT(A) restricted the addition to 12.5%.

What were the issues?

Whether the entire amount of alleged bogus purchases can be added to the income when sales declared by the assessee are accepted. The issue is about the correct method of taxing profit from accommodation entries.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

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

Before: SHRI VIKAS AWASTHY

For Appellant: Shri Sanjay R. Shah (Assessee in person)
For Respondent: Shri Sanjay J. Sethi, Shri Sanjay R. Shah (Assessee in person)

आदेश/ ORDER

1.

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-40, Mumbai ( in short ‘the CIT(A)’) dated 25/03/2019 for the assessment year 2010-11.

2.

The brief facts of the case as emanating from records are: The assessee is engaged in manufacturing and trading of school bags. On the basis of (A.Y.2010-11) information received from Sales Tax Department, Government of Maharashtra, the assessment for assessment year 2010-11 in the case of the assessee was reopened. As per the information received, the assessee had obtained bogus purchase bills amounting to Rs.1,47,656/- from Shree Yamuna Impex, a declared hawala operator. In reassessment proceedings, the Assessing Officer made addition of the entire alleged bogus purchases. Aggrieved by the assessment order dated 15/02/2016 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) following the decision rendered in the case of CIT vs.Simit P. Sheth, 356 ITR 451(Guj). restricted the addition to 12.5% of the bogus purchases. Against the findings of CIT(A), the Revenue is in appeal before the Tribunal.

3.

Shri Sanjay J. Sethi, representing the Department vehemently defended the assessment order and prayed for reversing the finding of CIT(A). The ld.Departmental Representative submitted that the assessee has failed to prove genuineness of the purchases. In response to notice issued under section 133(6) of the Ac, the supplier of the goods has stated that he has no business relation with the assessee. The ld.Departmental Representative prayed for upholding the assessment order.

4.

Shri Sanjay R. Shah, the assessee appeared in person and prayed for upholding the order of CIT(A). He stated that he has accepted the findings of CIT(A) and has paid taxes thereon. He is not filing any further appeal.

5.

Both sides heard, orders of authorities below examined. The assessment in the case of assessee was reopened on the basis of information that the assessee has indulged in obtaining accommodation entries through hawala operator. The assessee allegedly obtained bogus purchase bills

(A.Y.2010-11) amounting to Rs.1,47,656/-. The Assessing Officer made addition of the entire such bogus purchases. Undisputedly, the Assessing Officer has accepted the sales declared by the assessee. Without purchases there cannot be sales. Therefore, the entire alleged bogus purchases cannot be added. It is only profit element embedded in alleged bogus transactions that has to be brought to tax. The CIT(A) restricted the addition to 12.5% of such bogus purchases. I concur with the order of CIT(A). The impugned order is upheld and the appeal by the Revenue is dismissed.

6.

In the result, appeal by the Revenue is dismissed.

Order pronounced in the open court on Thursday the 3rd day of December, 2020.

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