ITO, 26(2)(3), MUMBAI vs. MOHAMMED AYUB KHAN, MUMBAI

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ITA 525/MUM/2019Status: DisposedITAT Mumbai30 January 2020AY 2011-122 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 Tribunal upheld the CIT(A)'s decision to restrict the addition to 12.5% of the alleged bogus purchases. This was based on the principle of taxing only the profit element embedded in such purchases, especially since the corresponding sales were not disputed.

What were the facts?

The Revenue appealed against the CIT(A)'s order which restricted the addition for alleged bogus purchases to 12.5%, down from the AO's addition of 25%. The assessee was engaged in trading scrap and the AO had reopened the assessment based on information about accommodation bills.

What were the issues?

Whether the addition for bogus purchases should be restricted to the profit element, and if the CIT(A)'s reduction from 25% to 12.5% was justified.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, SMC Bench, Mumbai

Before: Shri R.C. SharmaShri Mohammed Ayub Khan

For Appellant: Shri Anoop Hiwase
For Respondent: Shri Satishchandra Chandak
Hearing: 28.01.2020Pronounced: 30.01.2020

This is an appeal filed by the Revenue against the order of the CIT(A)- 38, Mumbai for A.Y. 2011-12, in the matter of order passed under Section 143(3)/147 of the Income Tax Act, 1961 (hereinafter "the Act").

2.

In this appeal the Revenue is aggrieved by the action of the CIT(A) according addition only to the extent of 12.5% in respect of the alleged bogus purchases, which was made by the AO at 25% of the bogus purchase.

3.

Rival contentions have been heard and record perused. Brief facts of the case are that the assessee is engaged in trading ferrous and non ferrous scrap. The AO got information regarding the assessee taking accommodation bills of purchases. Accordingly he reopened assessee by observing that the assessee has inflated purchase price. The AO added 25% of the alleged bogus purchases in assessee’s income. By the impugned order the CIT(A) restricted the addition to the extent of 12.5%

Shri Mohammed Ayub Khan after observing that corresponding sales were not disputed. After considering the entire facts and circumstances and applying the judicial pronouncement as laid down by the Hon'ble Gujarat High Court in the case of CIT vs. Smit P. Sheth 356 ITR 451 the CIT(A) restricted the addition to the extent of profit element embedded in such alleged bogus purchases t the extent of 12.5%. The detailed findings reported by the CIT(A) as per paras 7.1.1 to7.3.8 has not been controverted by bringing any positive record. Accordingly I do not find any reason to interfere in the order of the CIT(A) restricting the addition in respect of bogus purchases to the extent of the profit element embedded therein.

4.

In the result, the appeal filed by the Revenue is dismissed.

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