ITO 25 (1)(3), MUMBAI vs. SUJIT OJHA, MUMBAI

PDF · subscribers
ITA 7182/MUM/2018Status: DisposedITAT Mumbai26 February 2020AY 2011-123 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 CIT(A) restricted the addition to 25% of the purchases, relying on a Gujarat High Court decision that held entire purchases cannot be added when sales are accepted. The Tribunal found no reason to interfere with the CIT(A)'s order.

What were the facts?

The Assessing Officer (AO) reopened the assessment based on information that the assessee, engaged in electrical works, had taken accommodation bills for purchases. The AO added the entire purchase amount to the assessee's income.

What were the issues?

Whether the entire purchases, suspected to be bogus, can be added to the assessee's income, or if a profit element should be considered. The applicability of judicial precedents on similar facts.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

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

Before: SHRI R.C. SHARMA & SHRI PAWAN SINGH

For Respondent: Shri Satishchandra Rajore
Hearing: 25/02/2020Pronounced: 26/02/2020

O R D E R PER R.C. SHARMA, ACCOUNTANT MEMBER

This is an appeal filed by the revenue against the order of CIT(A)- 53, Mumbai dated 22/10/2018 for A.Y.2011-12 in the matter of order passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961.

2.

Nobody appeared on behalf of the assessee inspite of issuance of service of notice. However, no adjournment petition was filed by the assessee. Accordingly, Bench decided to dispose the appeal after hearing the ld. DR and considering the material placed on record.

3.

We have gone through the orders of the authorities below and found from record that assessee is engaged in the business of electrical works contract. AO got information from Sales Tax department regarding assessee taking accommodation bill with regard to the purchases. Accordingly, assessment was reopened and thereafter, AO added entire such purchases in assessee’s income.

4.

By the impugned order CIT(A) restricted addition to the extent of 25% after having the following observation:-

“5.6. I am guided by the ratio of decision of the Hon'ble Gujarat High Court in the case of CIT Vs Simit P. Sheth pronounced on 16.1.2013 in tax appeal No.5531 of 2012 wherein the Hon'ble Court have held that when the total sale is accepted by the AO, then the entire purchases cannot be added to the income of the appellant. The Hon'ble Court have, therefore, held that fair profit ratio would be needed to be added back to the income of the assessee. 5.7. Even if materials have been purchased, they are not purchased from these parties and may be in cash from mi-disclosed parties. By purchasing from the grey market, the appellant would have benefitted by the savings of taxes. This is not a case of trading where one to one correspondence between purchase and sales can be shown. Therefore, in fact and circumstances of the case, in this particular case, it is considered most appropriate to adopt 25% profit which can take care of the rotation of capital utilised for such transaction. Hence in the light of finding of the Hon'ble Gujarat High Court in the case of CIT vs. Simit P. Sheth, 25% profit is found to be appropriate for ascertainment of taxable income related to such transaction. It is noted from TAR that though the appellant is a trader, no stock records are maintained/Also, on identical facts for AY 2010-11 in the case of the appellant, the same AO in similar circumstances, has made a disallowance @ 25% of the purchases and the addition made by the AO was upheld. In AY 2011-12, no distinguishable facts are recorded for making disallowances @ 100% of the impugned purchases. Hence, for AY 2011-12, the disallowance is upheld to the extent of 25%. / The assessee gets relief of Rs.5,59,694/-. Thus Ground of Appeal No. 2 is partly allowed.”

5. It is clear from the order CIT(A) that he has dealt with the issue threadbare and after applying various judicial pronouncements to the facts of the case confirmed addition to the extent of 25% of alleged bogus purchases so as to fill the gap of loss of revenue if any. The detailed finding so recorded by CIT(A) at para 5.1 to 5.7 has not been controverted by the ld. DR by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the findings of CIT(A) for upholding addition to the extent of 25% of alleged bogus purchases.

6.

In the result, appeal of the revenue is dismissed.

Order pronounced in the open court on this 26/02/2020

More judgments on Section 147

All 49,210 judgments and leading authorities on Section 147 →

Recent GST High Court judgments

Search GST case law →