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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 18.03.2019 passed by the Commissioner of Income Tax (Appeals) -20, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009- 10.
The assessee has raised the following grounds: -
In the facts & circumstances of the case & in law, the Ld "1 CIT (A) has erred in upholding the action of the AO in re- opening of the assessment u/s 147 of the Act.
2. In the facts and in the circumstances of the case and in law, Ld CIT (A) erred in sustaining the addition of Rs.13,08,846/- on account of purchase from alleged hawala dealers, due to failure to maintain stock register as per A.Y.2009-10 Form 3CD, discrepancy in delivery challan concerning no seal of commercial tax dept and non-traceability of the parties.
3. In the facts and in the circumstances of the case and in law, Ld CIT (A) erred by not appreciating the business profile. manufacturing nature and procedures of the appellant and that physical enumeration of consumption or production was difficult for small businesses like the appellant and ignoring the available books of accounts of the appellant.
4. In the facts and in the circumstances of the case and in law, Ld. CIT (A) erred by not appreciating that practically it would be difficult to produce parties after 7 years and that the AO had the option and powers of verifying the genuineness of the transactions from the bank and jurisdictional AO of the alleged hawala parties but the same was not done."
3. The brief facts of the case are that the assessee filed its return of income on 30.09.2009 declaring total income to the tune of Rs.44,80,580/- for the A.Y.2009-10. Thereafter, the return was processed u/s 143(1) of the I. T. Act, 1961. Therefore, the case of the assessee was reopened on the basis of an information was received from the Sales Tax Department, therefore, DGIT(Inv.), Mumbai in which it was conveyed that the assessee has made the bogus purchase of Rs.13,08,846/- during the year under consideration from the following parties.:
S. No. Name of the concern PAN F.Y. Amount (Rs.) 1 Tara Enterprises AWTPS0269A 2008-09 6,56,414/- 2 Kotson Impex AACCK9104C 2008-09 6,52,432/- Total Amount of bogus purchases 13,08,846/- 2 A.Y.2009-10 Thereafter, the notice was given and after the reply of the assessee, the AO raised the addition to the extent of 13,08,846/- and assessed the total income to the tune of Rs.57,89,430/-. Feeling aggrieved, the assessee filed an appeal before the CIT(Appeals) who confirmed the addition, therefore, the assessee has filed the present appeal before us.
We have heard the argument advanced by the Ld. Representative of the Department and perused the record. The Ld. Representative of the revenue has argued that the CIT(A) has rightly confirmed the addition of bogus purchase to the extent of 100%, therefore, the order of the CIT(A) is liable to be confirmed in the interest of justice. In the instant case, the AO issued the notices to the parties u/s 133(6) which were not served. Thereafter, the AO asked the assessee to produce the parties to which the assessee failed to produce the same. However, the assessee has produced the documents in which it has been showed that the payment was made to the parties by cheque. The assessee also produced the necessary documents showing that the material was received and utilized. The assessee also produced the ledger account, copies of bill for purchase from M/s. Tara Enterprises and M/s. Kotsons Impex, Bank Statements of purchase with quantity details and amounts and sales invoices, delivery challan and ledger account. No further enquiry was done. Sale is not disputed. The books of account has not been rejected. The Hon’ble High Court of Gujarat in case CIT Vs. Simit P. Sheth (2013) 356 ITR 451 (Guj) has held that the profit embedded to the purchase is liable to be added to the income of the assessee in the interest of justice. It is specifically held that the whole addition of bogus purchase is not justifiable. There are number of decisions in which it has been specifically held that in case of bogus purchase the 3 A.Y.2009-10 addition is liable to be justifiable to the extent of profit element. Some judgements are hereby mentioned below. (i) CIT Vs. Bholanath Poly Fab Ltd. (2013) 355 ITR 290 (Guj). (HC) (ii) CIT Vs. Simit P. Sheth (2013) 356 ITR 451 (Guj) (iii) CIT Vs. Sanjay Oil Cake Industries (2009) 316 ITR 274 (Guj) (iv) ITO Vs. Permanand (2007) 107 TTJ 395 (Jd) (v) Shri Madhukant B. Gandhi Vs. ITO Bench „B‟ dt. 23.02.2010 (AY 2005-06) (Mum)(Trib) (vi) Sanjeev Woolen Mills Vs. CIT (2005) 279 ITR 434) (SC)
Taking into account, all the facts and circumstances, we are of the view that to meet the interest of justice we restrict the addition to the extent of profit ratio @ 12.5% of the bogus purchase. Accordingly, we allowed the claim of the assessee.
In the result, the appeal filed by the assessee is hereby partly allowed. Order pronounced in the open court on 11 /11/2020 (SHAMIM YAHYA) (AMARJIT SINGH) न्यधनिक सदस्य/JUDICIAL MEMBER लेखध सदस्य / ACCOUNTANT MEMBER मुंबई Mumbai; ददनांक Dated : 11/11/2020 Vijay Pal Singh, Sr. P.S.