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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 21.08.2018 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.
The first issue raised by the Revenue in ground 1 and 2 of appeal is against the order of CIT(A) restricting the disallowance made
M/s. Mazda Hi-Tech Electricals Pvt. Ltd. by the AO on account of bogus purchases at 12.5% against the 100% addition made by the AO.
The facts in brief are that the assessee filed his return of income on 24.09.2009 declaring total income of Rs.9,31,30,430/- which was processed u/s 143(1) of the Act. Thereafter the AO received information from DGIT (Inv.), Mumbai that the assessee is beneficiary of hawala purchase entries to the tune of Rs.10,98,959/- and accordingly reasons were recorded by issuing a notice u/s 148. The AO issued show-cause notice to the assessee to prove the genuineness of the purchases by furnishing bills , vouchers and other evidences failing which why the same should not be added to the total income of the assessee. Accordingly the assessee filed a copies of bills, vouchers and other evidences to prove the genuineness of the purchases. However the reply of the assessee did not find favour with the AO. Ultimately, the AO observed that the assessee has made corresponding sales relating to bogus purchases and therefore the only presumption was that the assessee has made purchases from open market at lower rates . Finally the AO treated the entire purchases as non genuine and added the said bogus purchases of Rs.10,98,959/- to the income of the assessee by framing assessment u/s 143(3) r.w.s. 147 of the Act.
In the appellate proceedings, the ld. CIT(A) restricted the disallowance to 12.50 of the alleged bogus purchases and thus partly allowed the appeal of the assessee after taking into account the contentions and submissions made by the assessee during the course of appellate proceedings and by following the decisions of Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Sheth reported in 356 ITR 451 and in the case of M/s Bholanath Poly Fab. P. Ltd. reported in 355 ITR 290.
M/s. Mazda Hi-Tech Electricals Pvt. Ltd.
After hearing both the parties and perusing the material on record, we observe that in this case the undisputed facts are that the assessee was beneficiary of hawala purchase entries to the tune of Rs.10,98,959/-. Though the assessee has tried to substantiate and prove the genuineness of the purchases but the AO added the entire amount of bogus purchases to the income of the assessee by treating the same as non genuine as the same were made from hawala dealer who are engaged in issuing bogus purchase bills . The AO however did not dispute the sales of the assessee. The ld. CIT(A) reduced the said addition by applying 12.5% bogus purchases bogus purchases by following the decision of CIT vs. Simit P. Sheth and M/s Bholanath Poly Fab. P. Ltd. We find no reasons to interefere in the order of CIT(A) as the appellate authority has passed a reasonable order by following the ratio laid in the above decisions. We are therefore inclined to uphold the order of the ld. CIT(A) on this issue which is pursuant to the decision of the various High Courts and Tribunals by dismissing the appeal of the Revenue.
In the result, the appeal of the Revenue is dismissed.
The second issue raised in the Ground No.3 is against the deletion of disallowance by ld. CIT(A) as made by the AO u/s 14A r.w.r 8D by not appreciating the fact that the disallowance u/s 14A r.w.r 8D can be made in respect of exempt income being dividend received from shares held as stock-in-trade.
The facts in brief are that the assessee has claimed exempt income of Rs.82,90,278/-. The assessee submitted before the AO that no expenses were incurred to earn the said exempt income however in the computation of income the assessee has suo moto disallowed an amount of Rs.13,16,000/- u/s 14A of the Act. The AO rejected the computation of the assessee and applied section 14A r.w.r 8D and M/s. Mazda Hi-Tech Electricals Pvt. Ltd.
computed the disallowed of Rs.18,15,095/- comprising Rs.1316000/- under Rule 8D2(ii) and Rs. 4,45,300/- under rule 87D(2)(iii) and after allowing the credit of suo moto disallowance an addition of Rs.4,99,095/- was made u/s 14A r.w.r 8D to the income of the assessee.
In the appellate proceedings, the ld. CIT(A) allowed the appeal of the assessee by recording finding that the calculation was wrongly made by the AO where the average value of total assets was taken Rs.33,85,19,870/- instead of Rs.53,29,07,797/- and if the same is taken correctly, the suo motto disallowance u/s 14A will be Rs.13,15,437/- and thus the disallowance of Rs.1316000/- made by the assessee is sufficient.
After hearing both the parties and perusing the material on record, we observe that the Revenue has raised a ground that the application of 14A disallowance would be applicable when the shares are held in stock-in-trade. But this was not the issue either before AO or CIT(A) and therefore the ground no. 3 has wrongly been taken. When the ld DR is confronted with this fact , she fairly agreed to this. Accordingly the ground is dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 29.01.2020.