DHANERA METAL SUPPLY CORPORATION,MUMBAI vs. ACIT-CIRCLE- 19 (1), MUMBAI

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ITA 2294/MUM/2019Status: DisposedITAT Mumbai16 December 2020AY 2010-114 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal upheld the reopening of the assessment. However, it directed the Assessing Officer to recompute the addition based on the profit element embedded in the bogus purchases, aligning with the jurisdictional High Court's decision.

What were the facts?

The assessee firm, engaged in metal trading, had its assessment reopened based on information that it obtained bogus purchase bills. The Assessing Officer made an addition of 12.5% of the alleged bogus purchases, which was upheld by the CIT(A).

What were the issues?

The key issues were the validity of the reopening of assessment and the quantum of addition made on account of alleged bogus purchases.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 143(3),Section 147

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

Before: SHRI VIKAS AWASTHY

For Respondent: Shri Ajay Pratap Singh

आदेश/ ORDER

1.

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-29, Mumbai (in short ‘the CIT(A)’) dated 20/02/2019 for the assessment year 2010-11.

2.

The brief facts of the case as emanating from records are : The assessee - firm is engaged in trading of ferrous and non-ferrous metals. The assessee filed its return of income for the impugned assessment year on 17/08/2020 declaring total

(A.Y.2010-11) income of Rs.23,69,402/-. The return of the assessee was processed under section 143(1) of the Income Tax Act, 1961 ( in short ‘the Act’). On the basis of information received from Sales Tax Department, Government of Maharashtra by the Director General of Income Tax (Investigation), Mumbai the assessment in the case of assessee for assessment year 2010-11 was reopened. As per the information received, the assessee had obtained bogus purchase bills amounting to Rs.1,22,60,523/- from Shree Sundha Steels Pvt. Ltd., a declared hawala dealer. The Assessing Officer in reassessment proceedings made addition of Rs.15,32,565/- i.e. 12.5% of the alleged bogus purchases. Aggrieved by the assessment order dated 19/02/2016 passed under section 143(3) r.w.s 147 of the Act, the assessee filed appeal before the CIT(A) challenging reopening, as well as addition on merits. The CIT(A) after considering the contentions raised by the assessee dismissed the appeal in toto. Hence, the present appeal by the assessee.

3.

Shri Ajay Pratap Singh, representing the Department vehemently defended the impugned order. The ld. Departmental Representative submitted that the assessee had obtained bogus purchase bills from declared accommodation entry provider. The authorities below were fair and justified in making addition to the extent of profit embedded in the bogus transactions. The ld. Departmental Representative placed reliance on the decision in the case of Simit P. Sheth, 356 ITR 461 (Guj) and prayed for dismissing the appeal of assessee.

4.

Submissions made by ld. Departmental Representative heard, orders of authorities below examined. The assessee in its appeal has primarily raised two issues, i.e. (i) Against reopening of assessment; and (ii) Adhoc addition of Rs.15,32,565/- i.e. 12.5% of alleged bogus purchases.

5.

In so far as ground No. 1 of the appeal is concerned, the CIT(A) has dealt with this issue in detail and has rejected the contentions of the assessee against reopening. In the absence of any contrary material on record, I concur with the findings of CIT(A) on this issue. Accordingly, ground No.1 of the appeal is dismissed.

(A.Y.2010-11) 6. The ground No.2 of the appeal is against addition made on account of bogus purchases. During the assessment proceedings, the assessee had filed various documents viz. Bank statement, stock register and original invoices to prove the genuineness of the purchases. However, we observe that no documents were furnished by the assessee to show trail of goods. Mere payments made through cheque/banking channels are not sacrosanct and hence, cannot be taken as proof of genuineness of the transaction. The Hon'ble Bombay High Court in the case of PCIT vs. Mohammad Haji Adam & Co, in Income Tax Appeal No.1004 of 2016 decided on 11/02/2019 has held that where the entity has been found to have engaged in obtaining bogus purchase bills, it is only the profit element embedded in such bogus transactions that has to be brought to tax. The addition be made to the extent of G.P rate on purchases at the same rate of other genuine purchases. The ground No.2 of the appeal is restored to Assessing Officer for recomputation of G.P on bogus purchases in line with the decision of Hon’ble Jurisdictional High Court (supra). The Assessing Officer shall grant reasonable opportunity of hearing to the assessee and shall allow the assessee to produce relevant records to show G.P earned during the relevant period. Consequently, the ground No.2 of the appeal is allowed for statistical purposes in the terms aforesaid.

7.

In the result, appeal by the assessee is partly allowed for statistical purpose.

Order pronounced in the open court on Wednesday the 16th day of December, 2020.

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