NAVJEEVAN SYNTHETICS PVT. LTD.,MUMBAI vs. DCIT- 4 (3)(1), MUMBAI
What did the Tribunal hold?
The Tribunal held that since the goods were consumed or sold, only the profit element should be taxed. Given the documentary evidence and the fact that goods were purchased from the grey market, a disallowance of 8% on the total purchase value from these parties would meet the ends of justice.
What were the facts?
The assessee purchased goods from dealers whose names appeared on the Sales Tax department's hawala list. The Assessing Officer (AO) taxed the profit element at 12.5% on these purchases. The assessee provided purchase bills, payment proofs, and stock records, and payments were made by account payee cheques.
What were the issues?
Whether the disallowance on account of purchases from hawala dealers, where payments were made by cheque and goods were consumed/sold, is justified. The extent of profit element to be taxed on such purchases.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B”, BENCH
Before: SHRI MAHAVIR SINGH, JM & SHRI M.BALAGANESH, AM &
आदेश / O R D E R PER M. BALAGANESH (A.M): These appeals in 5525/Mum/2018 for A.Yrs.2009-10 & 2010-11 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-9, Mumbai in appeal No.CIT(A)- 9/Cir.4/498/2015-16 & CIT(A)-9/Cir.4/144/2015-16 respectively dated 23/07/2018 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 25/01/2016 & 27/03/2015 respectively by the ld. Dy. Commissioner of Income Tax – 4(3)(1), Mumbai (hereinafter referred to as ld. AO).
The ground No.1 raised by the assessee challenging the validity of reopening was stated to be not pressed by the ld. AR at the time of hearing for which necessary endorsement has been made in our file. Accordingly, the same is dismissed as not pressed for both the years.
The ground No.2 raised by the assessee is with regard to action of the ld. CIT(A) confirming the disallowance made on account of non- genuine purchases @12.5%.
3.1. We have heard rival submissions. It is not in dispute that assessee had made purchases from certain dealers whose name had appeared in the hawala list prepared by the Sales Tax department of Mumbai and accordingly, the ld. AO had brought to tax the profit element @12.5% on the total value of purchases made from those dealers. It is not in dispute that the assessee had submitted purchase bills / invoices issued by these alleged hawala parties, purchase orders, delivery challans, details of payment, bank statements, stock records etc., before the lower authorities. It is not in dispute that the payments have been made to these parties by account payee cheques. We find that assessee is engaged in the business of manufacturing and trading in textile cloth and processing of hosiery and velvet cloth. It is not in dispute that goods purchased from the alleged suppliers have been either consumed / sold by the assessee and hence, only profit element thereon needs to be brought to tax. Since, in the instant case, the entire documentary records were duly furnished by the assessee including the proof of delivery of goods by way of delivery challans and stock records and at the same time goods having been purchased from the grey market by the assessee is also not disputed. Hence, what could have been saved by the assessee in the instant case would be only the VAT portion and little bit of incidental profit in the overall transaction. Hence, we hold that the disallowance @8% on the total value of purchase from these alleged parties would meet the ends of justice. Accordingly, the ground No.2 raised by the assessee for both the years is partly allowed.
The ground No.3 raised by the assessee for both the years is general in nature and does not require any specific adjudication.
In the result, appeals of the assessee are partly allowed.
Order pronounced in the open court on this 08/01/2020
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