ITO 17(2)(4), MUMBAI vs. M/S N N TRADING CORPORATION, MUMBAI

आदेश / O R D E R PER: R.C. SHARMA, A.M. These are the appeals filed by the revenue against the separate orders of the ld. CIT(A)-58, Mumbai dated 19/11/2018 for the A.Y. 2010- 11 & 2009-10 in the matter of order passed U/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short, the Act).

“5. The issue is disallowance of sums represented by bogus accommodation entries. These entries are debited to Profit and Loss Account having effect in determination of taxable profit. The disallowance made is Rs 7,36,604 being 12% of total value of accommodation entries of which Assessing Officer had received information. It is a settled legal position that the onus is on assessee to prove the expense is genuine. Here Assessing Officer made effort to verify genuineness of transaction and failed as relevant documents were not placed before him. The onus therefore shifts to assessee, who failed to discharge the same. As clearly brought out in paragraph 6 of assessment order, the evidence produced are copy of purchase bills and purchase ledger accounts.

3 & 381/Mum/2019 ITO Vs M/s N.N. Trading Corpn. transfer to A. Only if A gets the product he can transfer the product to Y. The sequence is X→A→Y. No satisfactory evidence regarding the link X→A link in the chain proving that the goods were produced/manufactured by X and transferred to A is before me.

7. Before me the following were produced: 1. Ledger Accounts of Parties concerned 2. Purchase bills of Parties concerned 3. Bank Statement highlighting the payments 4. Sales bills corresponding to purchases concerned

The above, internal documents of assessee, does not establish that the goods existed. The appellant was willing to produce more documentary evidence as for AY 2009-10 but it was pointed these are also internal documents having limited utility. This is described in paragraph 6 above. In facts and circumstances of this case the primary requirement is not met. Hence the same is rejected in absence of external documents, requirement in facts and circumstances of the case.

We do not find any infirmity in the well reasoned appellate order of learned CIT(A) which we are inclined to affirm/sustain except that, in our considered view, the end of justice will be met in the instant case if GP is estimated to tune of 12.5% of the purchases from these alleged hawala operators which will cover any leakage of Revenue by way of VAT, commission etc.. Thus, as compared to the GP ratio at 7.11% declared by the assessee, we are estimating GP ratio at the rate of 12.5% on the said bogus purchases wherein the assessee will be allowed credit of declared GP ratio of 7.11% and net addition to GP ratio shall be to the tune of 5.39% on bogus purchases, hence, we allow partial relief to the assessee. We order accordingly.

It can be seen that in the above the Hon.ITAT has reduced addition further vis-a-vis the originally accepted figure of 12.5%.Further in case of MIs Geolife Organics vs ACIT of Hon. ITAT, Mumbai dated 05.05.2017, despite all deficiencies in assessment procedure as against 12.5% disallowance made by Assessing Officer, the Hon TAT fixed the rate of disallowance at a lower level. The latter was relied upon by assessee in concluding portion of their submission.

6. Since the facts and circumstances of both the years are same, therefore, by following the reasoning given in the appeal for the A.Y. 2010-11, I also uphold the action of the ld. CIT(A) for the A.Y. 2009-10.