ASSISTANT COMMISSIONER OF INCOME TAX 19(2), MUMBAI vs. POPATLAL NATHALAL SHAH, MUMBAI

Aggrieved by the above order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties, partly allowed the appeal filed by the assessee.

Now before us, the revenue has preferred the appeal by raising the grounds of appeal as under:-

We have heard counsels for both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. We find that the identical ground raised in the present appeal has already been decided by the Coordinate Bench of ITAT in cross appeal filed by the assessee Popatlal Nathalal Shah in for the same AY 2014-15 in assessee’s own case, wherein the Hon’ble ITAT has dismissed the appeal on the grounds of merit. For the sake of clarity, which is reproduced below:-

We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the Tribunal in assessee’s own case in the preceding year i.e. AY 2012-13 in order dated 08.11.2017 has already confirmed the profit rate at the rate of 3% by observing in Para 7 as under: - “7. We have heard the ld. Departmental representative (for short ‘D.R’), perused the orders of the lower authorities and the material available on record. We have given a thoughtful consideration to the facts of the case and are of the considered view that the CIT(A) had by way of a very well-reasoned order restricted the addition in the hands of the assessee to the extent of 3% of the aggregate value of the purchases which were claimed by the assessee to have been made from the aforementioned dummy concerns, viz. (i) Mohit Enterprise; (ii) Mayur Exports; and (iii) Prime Star. We find that it remains as a matter of Popatlal Nathalal Shah fact borne from record that the assessee had failed to substantiate the genuineness and veracity of the purchases which were claimed to have been made from the aforementioned bogus suppliers. We further find that the A.O while concluding that the assessee had not made any genuine purchases from the aforementioned parties, had arrived at such a conclusion after taking cognizance of certain material facts, viz. (i) the persons in charge of the aforesaid bogus concerns had in their statements recorded on oath by the investigation wing during the course of the Search and survey action, had admitted that they were only dummies and the concerns were as a matter of fact managed and controlled by Shri. Bhanwarlal Jain and his family members;(ii) the said concerns were only providing accommodation bills and not carrying on any genuine business transactions; and (ii) assessee had failed to substantiate the genuineness and veracity of the purchases claimed to have been made from the aforesaid parties on the basis of irrefutable documentary evidences. We have given a thoughtful consideration to the facts before us and are of the considered view that the A.O had rightly concluded that the purchases claimed by the assessee to have been made from the aforesaid Popatlal Nathalal Shah dummy concerns could safely be characterized as bogus. We are of the considered view that the CIT(A) had rightly appreciated that now when the assessee had absolutely failed to lead any primary evidence to substantiate the genuineness and veracity of the purchases transactions under consideration, therefore, there remained no occasion for the A.O to have held the purchase transactions under consideration as genuine. We are further persuaded to be in agreement with the CIT(A) that now when the sales of the assessee had not been doubted and dislodged by the A.O, therefore, it could safely be gathered that the assessee had purchased the goods under consideration, though not from the aforementioned dummy concerns from whom bogus bills have been taken, but from certain unidentified parties operating in the open/grey market. We are further of the view that the CIT(A) had rightly appreciated that the addition in the hands of the assessee was liable to be restricted only to the extent of the profit element which was embedded in making of purchases from the open/grey market. We find that the CIT(A) though was not oblivious of the fact that in respect of bogus purchases made in a normal business, the courts had consistently estimated the profit Popatlal Nathalal Shah margin involved in making of purchases from the open/grey market @12.5% of the value of the bogus purchases, but then, not loosing sight of the fact that unlike those cases, in the trade line of diamond business the profit margin did not exceed 3%, had thus in all fairness restricted the addition in the hands of the assessee to 3% of the aggregate value of the bogus purchases which were claimed to have been made from the aforesaid parties. We have given a thoughtful consideration to the facts of the case and are persuaded to be in agreement with the view taken by the CIT(A). We thus being of the considered view that the CIT(A) had fairly concluded that the addition in respect of the purchases which were claimed by the assessee to have been made from the aforementioned bogus concerns, viz.(i)Mohit Enterprise; (ii) Mayur Exports; and(iii) Prime Star, were liable to be restricted to 3% of the aggregate value of the purchases, therefore, find no reason to dislodge his well-reasoned order. We thus, in the backdrop of our aforesaid observations, finding ourselves as being in agreement with the view taken by the CIT(A), dismiss the appeal of the assessee.”

Therefore, respectfully following the decision of Coordinate Bench of ITAT, which is applicable mutatis mutandis in the present case, we dismiss the grounds raised by the revenue.