ITO 27(1)(2), MUMBAI vs. ATUL V. LOTIA, MUMBAI

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ITA 5731/MUM/2018Status: DisposedITAT Mumbai20 November 2019AY 2010-115 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that while the assessee failed to substantiate the purchases, disallowing the entire amount was not justified. The addition should account for the profit element embedded in the transactions, which the CIT(A) had reasonably estimated at 12.5%.

What were the facts?

The assessee, engaged in the business of M/s Atul Steels, was assessed for AY 2010-11, with additions made for alleged bogus purchases. The Assessing Officer disallowed the entire purchases of Rs. 9.01 Lacs, while the CIT(A) restricted the addition to 12.5% of these purchases.

What were the issues?

Whether the entire amount of alleged bogus purchases should be disallowed, or if an estimation of profit is more appropriate. The validity of the CIT(A)'s approach in restricting the addition to 12.5% of the bogus purchases.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148,Section 133(6)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI

Before: HON’BLE SHRI C.N. PRASAD, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

For Appellant: Shri S. Michael Jerald-Ld. DR

आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member): - 1. Aforesaid appeal by revenue for Assessment Year [in short referred to as ‘AY’] 2010-11 contest the order of Ld. Commissioner of Income-Tax (Appeals)-25, Mumbai [in short referred to as ‘CIT(A)’], Appeal No.CIT(A)- Atul V. Lotia Assessment Year-2010-11 25/IT-807/2015-16/195 dated 05/07/2018 qua deletion of certain additions on account of alleged bogus purchases.

2.

None has appeared for assessee and no valid adjournment application is on record. Left with no option, we proceed to dispose-off the appeal after hearing learned Departmental Representative who supported the additions made by Ld.AO. 3.1 Facts on record would reveal that the assessee being resident individual stated to be engaged in business under proprietorship concern namely M/s Atul Steels was assessed for year under consideration u/s 143(3) r.w.s. 147 on 12/02/2016 wherein the returned loss of Rs.33.42 Lacs filed by the assessee on 11/10/2010 was reduced to Rs.24.39 Lacs on account of addition of Rs.9.01 Lacs on account of alleged bogus purchases. 3.2 Pursuant to receipt of certain information from the DGIT (Inv.) wing, Mumbai/Sales Tax Department, Govt. of Maharashtra, it transpired that the assessee stood beneficiary of accommodation purchases bills aggregating to Rs.9.01 Lacs stated to be obtained from three entities, the details of which have already been extracted in para-2 of quantum assessment order. Accordingly, the case was reopened as per due process of law vide issuance of notice u/s 148 on 30/01/2015 which was followed by statutory notices u/s 142(1) wherein the assessee was directed to substantiate the stated purchase transactions by filing requisite details. Although the assessee defended the purchases, however, notices issued u/s 133(6) to confirm the transactions remained unserved and the assessee failed to produce any of the suppliers to confirm the transactions. Resultantly, the Atul V. Lotia Assessment Year-2010-11 stated purchases were disallowed and added to the income of the assessee. 4. Aggrieved, the assessee contested the stand of the Ld. Assessing Officer before learned first appellate authority vide impugned order dated 05/07/2018 on legal grounds as well as on merits. The legal ground raised

1.

by the assessee did not find favor with Ld. CIT(A). However, on merits, Ld. CIT(A) held that the correct approach would be to estimate the additional benefit or profit earned on those purchases and not to disallow the entire purchases. Therefore, inter-alia, relying upon the decision of Hon’ble Gujarat High Court rendered in CIT V/s Bholanath Poly Fab Pvt Ltd. 355 ITR 290 and CIT V/s Simit P. Sheth 356 ITR 451, the impugned additions were restricted to 12.5% of alleged bogus purchases. Aggrieved, the revenue is in further appeal before us. It appears that the assessee has not preferred any further appeal.

5. After careful consideration, we are of the considered opinion there could be no sale without actual purchase of material keeping in view the assessee’s nature of business. Undisputedly the assessee was in possession of primary purchase documents and the payments to the suppliers were through banking channels. The sales turnover achieved by the assessee has not been disputed by the revenue. However, at the same time, the assessee miserably failed to substantiate the purchases and could not produce any of the suppliers to confirm the transactions and therefore, the onus casted upon assessee, in this regard, remained undischarged. Therefore, on the given facts and circumstances, disallowance of entire Atul V. Lotia Assessment Year-2010-11 purchases, in our opinion, would not be justified rather the additions which could be sustained, would be to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which learned first appellate authority has rightly done so. Therefore, finding the estimation of 12.5% to be quite fair and reasonable, we dismiss the appeal.

6.

Resultantly, the appeal stands dismissed. Order pronounced in the open court on 20th November, 2019 Sd/- Sd/- (C.N. Prasad) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांकDated : 20/11/2019 Sr.PS:-**PP,SPS आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकरआयु�(अपील) / The CIT(A) 3. आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड�फाईल / Guard File 6. आदेशानुसार/ BY ORDER,

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