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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI RAJESH KUMAR, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The revenue has filed the present appeal against the order dated 07.01.2019 passed by the Commissioner of Income Tax (Appeals) -33, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2010- 11.
The revenue has raised the following grounds: - "
1 'On the facts and circumstances of the case and in law the learned CIT(A) erred in reducing the addition on account of bogus purchases amounting to Rs. 3,11,314/- (made 100 % of the bogus claim) to 30 % thereof at Rs. 93,395/- granting a relief of Rs. 2,17,919/- without appreciating the fact that the addition made on the basis of credible A.Y.2010-11 information received from the Maharashtra Sales Tax Dept. followed up by independent enquiries by the Assessing Officer" 2] "On the facts and circumstances of the case and in law the learned CHIA) erred in deleting the addition on account of bogus purchases amounting to Rs. 2,17,919/- without appreciating the fact that the assessee had failed to discharge his primary onus of proving the genuineness of the purchases claimed" 3.) On the facts and circumstances of the Case and in law the Learned CIT(A) erred in holding that the enquiries did not prove that the appellant has not purchased any material from any grey market when the 695505500 has faded to prove that the quantity of material in the bills was used in the manufacturing activity" 4] "On the facts and circumstances of the Case and in law the learned C.IT(A) erred in holding that by purchasing material from some other party and taking bill from the party under consideration, the assessee definitely has taken some benefits and only that profit element needs to be added when the assessee has failed to prove that the quantity of material in the bills was used in the manufacturing activity" 5) "On the facts and circumstances of the case and in law the learned CIT(A) erred in deleting the addition on account of bogus purchases amounting to Rs. 2,17,919/- without appreciating the fact that once it is proved that the purchase claimed was bogus then there is no reason or basis to estimate the disallowance and the entire bogus claim should be disallowed" 6 "The appellant prays that the order of the learned CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored" 7 "The appellant craves leave to amend or alter any ground or to submit additional new ground, which may be necessary."
3. The brief facts of the case are that the assessee filed his return of income on 30.09.2010 declaring total income to the tune at Rs.80,32,270/- for the A.Y.2010-11. The return was processed u/s 143(1) of the Act. The case of the assessee was reopened u/s 147 of the Act after recording the reasons for reopening on 06.02.2015. Notice u/s 148 of the Act was also issued and served upon the assessee. Thereafter, notices u/s 143(2) & 2 A.Y.2010-11 142(1) of the Act were issued and served upon the assessee. The assessee was engaged in the business of Supplying and Exporting Foundry Equipment & Materials. The case of the assessee was reopened on the basis of information received from the DGIT(Inv.) Mumbai in which it was conveyed that the assessee has taken the bogus purchase entries from Sona Tools Traders in sum of Rs.3,11,314/-. Notice given and after the reply of the assessee, the AO raised the 100% additions and assessed the income in sum of Rs.83,43,584/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who restricted the addition to the extent of 30% of the bogus purchase. The revenue was not satisfied, therefore, the revenue has filed the present appeal before us.
ISSUE Nos. 1 to 7 4. All the issues are in connection with the restriction of the addition to the extent of 30% of the bogus purchase. The Ld. Representative of the revenue has argued that the AO has rightly raised the addition to the extent of 100% of the bogus purchase but the CIT(A) has wrongly restricted the addition to the extent of 30% of the bogus purchase which is not justifiable, therefore, in the said circumstances, the finding of the CIT(A) is not justifiable and is not liable to be sustainable in the eyes of law and is liable to be set aside. However, on the other hand, the Ld. Representative of the assessee has strongly relied upon the order passed by the CIT(A) in question. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record: - “5. On perusal of facts of the case and submission of the appellant, I found that the grounds against re-opening have no merits. There was specific information about one bogus bill provider from whom the 3 A.Y.2010-11 assessee has taken accommodation entries. The information was specific based on detailed enquiries by the Sales Tax Department. Thereafter, the AO has applied his mind independently and re-opened that case. In view of above, the grounds taken against re-opening are hereby dismissed.
The facts and circumstances as outlined in the assessment order clearly suggest that the purchase transactions are unverifiable. During the assessment proceedings, the AO has issued notices u/s 133(6) of the Act to the parties, which could not be served by the inspector due to non-existence of the said party. The appellant was given the opportunity to produce the said party, which he could not do. It is further observed that the appellant has also failed to submit the evidence of delivery like Delivery challans, Lorry receipts etc.
It is further observed that even the purchases prices shown on the invoices are not subjected to verification and as such it is difficult to establish the genuineness of purchases and correctness of the purchase prices shown on the bills.
Considering the totality of facts and circumstances of the issue involved, in my considered opinion, the AO is not justified in making disallowance of 100% of purchase as the enquiries did not prove that the appellant has not purchased any material from any grey market. By purchasing material from some other party and taking bill from the party under consideration, the assessee definitely has taken some benefits and only that profit element needs to be added. I am of the view that 30% disallowance out of purchase of Rs.3,11,314/- will meet the ends of justice. Therefore, disallowance @ 30% of purchase of Rs.3,11,314/- = Rs.93,395/- is hereby sustained and balance disallowance being 70% of Rs.3,11,314/- = Rs.2,17,919/- is hereby deleted. The grounds of appeal
on merits are partly allowed.”
5. On appraisal of the above mentioned order, we noticed that the sale is not dispute and the books of account of the assessee was also not rejected. In the case titled as CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd. (ITXA. No.5604 of 2010) dated 17.12.2012. It is specifically held that the 100% addition is not justifiable. The CIT(A) has also relied upon the decisions in the case of Babulal C. Borana Vs. ITO (2006) 282 ITR 251 (Bom), CIT Vs. M.K. Bros (1987) 163 ITR 249 (Guj), CIT Vs.