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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI AMARJIT SINGH, JM & SHRI MANOJ KUMAR
O R D E R
PER AMARJIT SINGH, JM:
The revenue has filed the present appeal against the order dated 13.08.2018 passed by the Commissioner of Income Tax (Appeals) -38, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2011- 12.
The revenue has raised the following grounds: -
" I. "On the facts and in the circumstances of the case and in law, the Ld. C1T(A) has erred in restricting the disallowance to 12.5% of the total amount of bogus purchase transaction instead of 100% of the total amount of bogus purchase made by the AO."
A.Y.2011-12 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that the addition was made on the basis of information received from DIT(Inv.) and Sales Tax Department, Maharashtra with regard to bogus purchase made by the assessee from dealers without supply of actual goods." 3. "On the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in not considering that the hawala operators have admitted on oath before the Sales Tax Authorities that they have not sold any material to anybody." 4. "On the facts and in the circumstances of the case and in law, the Ld. C1T(A) has erred in not considering that the assessee could not prove the genuineness and creditworthiness of the purchase transactions during the course of assessment proceedings." 5. "The W. C1T(A) failed to uphold the decision of Hon’ble Apex Court in the case of N K Proteins Ltd. vs. DCIT in SLP(Civil) No.769/ 2017 dated 16.01.2017 where 100% of addition was confirmed by the Apex Court." 6. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that applicability of provisions of section 40A(3) attracts 100% bogus purchases to be held as profit."
The brief facts of the case are that the assessee filed his return of income on 30.09.2011 declaring total income to the tune at Rs.3,58,880/-. The return was processed u/s 143(1) of the I.T. Act, 1961. Thereafter, the case of the assessee was reopened after recording the reasons and accordingly notice u/s 147 of the Act dated 17.12.2015 was issued and served upon the assessee. Thereafter, notice u/s 148 of the Act dated 01.01.2016 was also issued and served upon the assessee. Thereafter, notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The assessee is an individual and Proprietor of M/s. R. D. Metal Works engaged in the business of manufacturing of all kinds of washers. A.Y.2011-12 During the year under consideration, the assessee derived income from business. The case of the assessee was reopened on the basis of an information received from the DGIT(In.) Mumbai in which it was conveyed that the assessee has taken the bogus purchase entries from the 7 parties in sum of Rs.66,66,673/- which are hereby as under: - S. No. TIN Name of the party Amount (Rs.) 1 27050389521V Shiddivinayak Steel 17,90,315 2 27460355491V Chanchal Tube Corporation 4,60,855 3 27550304371V Surat Tube Corporation 5,41,059 4 27860346638V Asian Steel 8,21,039 5 27450780696V Mumbai Trading Co. 2,00,041 6 27810282985V Vijjay Steels 12,54,147 7 27910508261V Gulab Trading Co. 15,99,217 Total 66,66,673 Thereafter, the AO raised the addition to the extent of peak of purchase which was works out to the tune of Rs.66,66,673/-. The total income of the assessee was assessed to the tune of Rs.70,25,553/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who restricted the addition to the extent of 12.5% of the bogus purchase in sum of Rs.66,66,673/-. The revenue was not satisfied, therefore, the revenue has filed the present appeal before us.
We have heard the argument advanced by the Ld. Representative of the parties and perused the record. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record: - ITA No. 472/M/2019 A.Y.2011-12 “8.1 The AO has brought to tax the entire bogus purchases of Rs.66,66,673/- to tax by adding the same to the income returned. The Ld.AR has brought to my notice the appeal order passed by my learned predecessor in appellant's own case for AY 2010-11 wherein he had disallowed 12.5% while passing the order for that year by following various case laws including the decision of Hon’ble High Court of Qujratin the case of Simit P Seth, 2013 (356 ITR 451). 1 find that the order passed by my Ld. predecessor is very reasonable. Since the facts and circumstances for both the years are same, respectfully following my 14. predecessor, I confirm the disallowance at 12.5% of the reported bogus purchases. Accordingly, the AO is directed to restrict the disallowance to 125% instead of disallowance of entire bogus purchases and the same be added to total income declared in the Return. The ground is partly allowed.”
On appraisal of the above mentioned finding, we noticed that the CIT(A) has decided the matter of controversy on the basis of the decision of Hon,ble, Gujrat High court in case titled as CIT Vs. Simit P. Sheth of 2012 dated 16.01.2013 and also decision of Hon’ble Bombay High Court in the case of CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd. and in the case of CIT Vs. Bholanath Poly Fab (P) Ltd. ITA. No.63 of 2012 dated 23.10.2012. The CIT(A) has also gone through facts of the present case and restricted the bogus purchase to the extent of 12.5% of Rs.66,66,673/-. However, at the time of argument, the Ld. Representative of the assessee has no objection to restrict the addition to the extent of 12.5% of the bogus purchase. Anyhow, on seeing the facts and circumstances, it seems quite justifiable to restrict the addition to the extent of 12.5% of the bogus purchase. We nowhere found any illegality and infirmity in the order passed by CIT(A) in question. Taking into account all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be A.Y.2011-12 interfere with at this appellate stage. Accordingly, all these issues are decided in favour of the assessee against the revenue.