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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)-25, 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 assessment year (AY) 2009-10.
2 M/s Scan Industries & 6177/Mum/2018 Assessment Year: 2009-10 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.7,75,975/- 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 NK 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.1,10,843/-, being 12.5% of the bogus purchases as even the basic onus of producing transport bills, delivery challans, transport bills 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) 2009-10 on 30.09.2009 declaring total income at Rs.2,69,570/-. The return was processed u/s 143(1) of the Act. On receipt of information from the Sales Tax Department, Government of Maharashtra that the assessee had obtained bogus purchase bills from Shyam Corporation (Rs.1,31,503/-) and Mahavir Enterprises (Rs.7,55,325/-) totaling to Rs.8,86,828/-, the Assessing Officer (AO) re-opened the assessment by issuing notice u/s 148 dated 24.03.2014. During the course of re-assessment proceedings, the AO issued notice u/s 133(6) to the above two parties in order to verify the genuineness of the purchases. However, those notices were returned un-served by the postal authorities with the remark “left”.
3 M/s Scan Industries & 6177/Mum/2018 Subsequently, the AO deputed the Inspector of Income Tax to make an inquiry to find out the identity of the party. The Inspector filed a report stating that the party did not exist in the address given. Thereafter, the AO asked the assessee to produce the party for examination. In response to it, the assessee submitted copies of bank statements. The AO noted that the assessee failed to furnish evidence such as delivery challans, transportation details etc. to substantiate its claim of purchases from the aforesaid parties. Considering the above facts, the AO made disallowance of the total amount of Rs.8,86,828/-.
Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that the Ld. CIT(A) by relying on the decision of the Hon’ble Gujarat High Court in CIT v. Bholanath Polyfab (P.) Ltd. (ITA No. 63 of 2012) estimated the profit @ 12.5% of the disputed amount of Rs.8,86,828/- which comes to Rs.1,10,853/-. Thus he deleted the balance amount of Rs.7,75,975/-.
Before us, the Ld. Departmental Representative (DR) submits that the notices issued by the AO u/s 133(6) to the above two parties were returned un-served by the postal authorities with the remark “left”. It is stated that those notices were issued in the address given by the assessee. Further, it is argued that the assessee failed to produce the parties before the AO for examination, though requested during the course of re-assessment proceedings. The Ld. DR further submits that the assessee failed to file evidence such as delivery challans, transportation details before the AO to substantiate its claim of purchases from the aforesaid parties. Thus the Ld. DR concludes that the addition of Rs.8,86,828/- made by the AO be restored.
4 M/s Scan Industries & 6177/Mum/2018 6. On the other hand, the Ld. counsel for the assessee submits that the assessee had submitted before the AO copies of bank statements to prove the genuineness of transaction. It is argued that instead of verifying the transactions through bank statements, the AO relied only on the inquiry conducted by the Sales Tax Department and made an addition of the full amount of Rs.8,86,828/-. The Ld. counsel argues that only the profit element embedded in such purchases be brought to tax and the Ld. CIT(A) has rightly done so.
We have heard the rival submissions and perused the relevant materials on record. In the case of N.K Proteins Ltd. (supra), there was search proceedings 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, there is no dispute that the assessee had filed before the AO copies of bank statements to establish the genuineness of the purchases. In such a situation, the AO could have made inquiry to establish the 5 M/s Scan Industries & 6177/Mum/2018 genuineness of the purchases. In the instant case, the AO has not done even an elementary inquiry. Thus the present case is distinguishable from the decision in N.K. Protiens Ltd. (supra) relied in the grounds of appeal.
We are of the considered view, that considering the facts and circumstances of the case only the profit embedded in such transactions be brought to tax, the Ld. CIT(A) has rightly estimated the profit @ 12.5% which comes to Rs.1,10,853/-. We affirm the order of the Ld. CIT(A).
Facts being identical, our decision for the AY 2009-10 applies mutatis mutandis to AY 2010-11.
In the result, the appeals filed by the revenue are dismissed.