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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. The captioned appeals filed by the Revenue are directed against the order of the Commissioner of Income Tax (Appeals)-24, Mumbai [in short CIT(A)] and arise out of the assessment completed u/s 143 r.w.s. 147 of the Income Tax Act 1961 (the ‘Act’). As common issues are involved, we are proceeding to dispose them off through a consolidated order for the sake of convenience. Facts being identical, we begin with the AY 2010-11. Though the case was fixed for hearing on 20.11.2019, neither the assessee nor his M/s DevenJitendra Seth 2 5631 & 5632/Mum/2018 authorized representative appeared before the Tribunal on the above date. Because of non-compliance by the assessee, we are proceeding to dispose off these appeal on merits after examining the materials available on record and after hearing the Ld. Departmental Representative (DR). Assessment Year: 2010-11 2. The grounds of appeal filed by the revenue read as under:
1) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.9,11,723/- made by the Assessing Officer on account of bogus purchases, without appreciating the fact that the assessee had failed to produce bills, vouchers and other documentary evidences in support of his claim and without considering the latest Apex Court decision in the case of N K Protein Ltd, wherein it is held that once it is proved that the purchases are bogus then addition should be made on entire purchases and not on profit element embedded in such purchases. 2) On the facts and circumstances of the case, the Ld. CIT(A) erred in estimating the profit from Hawala purchases by disallowing only Rs.1,30,246/-, being 12.5% of the bogus purchases as even the basic onus of producing transport bills, delivery challans, etc. were not fulfilled by the assessee.
Briefly stated, the facts of the case are that the assessee filed his return of income for the assessment year (AY) 2010-11 on 17.09.2010 declaring total income of Rs.3,66,630/-. The assessee manufactures plastic packing materials and does offset printing. The Assessing Officer (AO) received information for the Sales Tax Department, Government of Maharashtra that the assessee had obtained accommodation bills for purchases amounting to Rs.10,41,969/- through parties declared as hawala operators by the Maharashtra Sales Tax Department. On the basis of the said information, the AO re-opened the M/s DevenJitendra Seth 3 5631 & 5632/Mum/2018 assessment by issuing notice u/s 148 on 19.03.2015. During the course of re- assessment proceedings, the AO issued notice u/s 133(6) to the concerned parties. However, the notices were returned un-served by the postal authorities with the remark ‘left’. The AO brought this fact to the notice of the assessee vide letter dated 18.12.2015 and asked him to furnish latest address or to produce the parties for examination. As there was no response by the assessee to the above letter, the AO sent another reminder vide letter dated 12.01.2016 seeking explanation/compliance by 18.01.2016. In response to it the assessee filed documentary evidence in respect of Chapter VIA deduction and ledger account of the said parties and copies of bank statements. The AO noted that the assessee failed to furnish evidence such as delivery challans, transportation bills etc. to substantiate his claim of purchases from the said parties. The AO further observed that the assessee failed to produce the said parties in spite of opportunity being given. Therefore, treating the purchases as non-genuine, the AO made an addition of Rs.10,41,961/-.
In appeal, the Ld. CIT(A) by following the decision of the Hon’ble Gujarat High Court in the case of Simit P. Seth 356 ITR 451 confirmed the disallowance to the extent of 12.5% of the disputed purchases of Rs.10,41,961/- which comes to Rs.1,30,246/-.
Before us, the Ld. DR relies on the decision of the Hon’ble Supreme Court in N.K. Protein Ltd. and submits that the order passed by the AO be affirmed.
We have heard the Ld. DR and perused the relevant materials on record. In the case of N.K Proteins Ltd. (supra), there was search proceedings M/s DevenJitendra Seth 4 5631 & 5632/Mum/2018 conducted by the Revenue at the office premises of the assessee wherein blank signed cheque books and voucher of number of concerns were found. Accordingly, the purchases made from these concerns were treated as bogus by the AO and the entire deposits in bank accounts of these parties were treated as assessee’s income on protective basis. On appeal, the ITAT restricted the addition on account of alleged bogus purchases at 25% i.e. Rs.73,23,322/- of the total purchases amounting to Rs.2,92,93,288/-. On further appeal, the Hon’ble High Court modified the order of the Tribunal and directed for addition of entire bogus purchases. After hearing the counsels, the Hon’ble Supreme Court dismissed the SLP filed by the assessee and confirmed the decision of the High Court for addition of entire income on account of bogus purchases. In the instant case, the notices issued by the AO u/s 133(6) were returned un-served by the postal authorities with the remark ‘left’. However, the assessee filed before the AO the ledger account of the aforesaid parties and copies of bank statements. The assessee failed to produce the parties before the AO for examination, though specific opportunity was given. As the assessee filed before the AO the ledger account and bank statements, the AO could have made certain inquiries and verifications. He has not done any inquiry or verification. In such a situation, the decision in the case of N.K. Protein Ltd. (supra) relied on by the Ld. DR is not applicable. Rather the decision in the case of Simit P. Seth (supra) relied on by the Ld. CIT(A) is applicable.