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Income Tax Appellate Tribunal, “SMC” BENCH,
Before: SHRI SHAMIM YAHYA, AM & SHRI AMARJIT SINGH, JM
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH, JM आयकर अपील सं/ I.T.A. Nos.4759, 4760 & 4761/Mum/2018 (निर्धारण वर्ा / Assessment Years: 2010-11, 2009-10 & 2011-12) M/s. M. P. Brothers बिधम/ ACIT Circle 17(2) 64, Eby Castle Mohamed Ali Mumbai. Vs. Road, Mumbai-400003. स्थायी लेखा सं./जीआइआर सं./PAN/GIR No. :AACCB6672L (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Assessee by: Shri Mandar Vaidya Revenue by: Shri Chaitanya Anjaria (DR) सुनवाई की तारीख / Date of Hearing: 04/09/2019 घोषणा की तारीख /Date of Pronouncement: 07/11/2019 आदेश / O R D E R PER AMARJIT SINGH, JM: The assessee has filed the above mentioned appeals against the order dated 10.05.2018 passed by the Commissioner of Income Tax (Appeals) - 57, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Ys.2009-10, 2010-11 & 2011-12. ITA. NO.4760/Mum/2018 2. The assessee has filed the present appeal against the order dated 10.05.2018 passed by the Commissioner of Income Tax (Appeals) -57, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Ys.2009-10. 3. The assessee has raised the following grounds: -
ITA No. 4760, 4759 & 4761/M/2018 A.Y.2009-10, 2010-11 & 2011-12 “1. The learned Assessing Officer relying on list received in the office of DGIT (Inv.), Mumbai erred in considering purchase of Rs.52,047/- made from Ankit Enterprises and Darshana Corporation of Rs.10,795/- and Rs.41,252/- respectively as non- genuine purchases and accordingly added Rs.52,047/- as "Suppression of Profit". Looking to the facts and circumstances of the appellant and in law, the appellant submits that the purchases made by the appellant from the above referred parties are genuine as it backed by Invoices, Account Payee Cheques and also backed by the respective total sales of Rs.59,637/- and accordingly the appellant has shown profit of Rs.6,204/- on sale of Rs.59,637/- in their Profit & Loss Account. The learned Assessing Officer has failed to consider these facts. Your appellant submits that both the purchases as well as sales are genuine. The learned Assessing Officer be directed to delete the said addition of Rs.52,047/-. 2) Without prejudice to the above, your appellant further submits that if a sum of Rs.52,047/- relating to non-genuine purchases are to be disallowed/added, then the corresponding sales of Rs.59,637/- shown in Profit & Loss Account should also be reduced. Accordingly, the learned Assessing Officer be directed to reduce the said sale amount of Rs.59,637/- from the income. 3) Your appellant reserves the rights to add, amend or alter the aforesaid grounds of appeal as they may think fit by themselves or by their representatives.” 4. The brief facts of the case are that the assessee filed his return of income on 29.09.2009 declaring total income to the tune of Rs.30,86,876/-. The return was processed u/s 143(1) of the I. T. Act, 1961. The case was selected for assessment us/ 147 of the Act. Notice u/s 148 of the Act was issued and served upon the assessee. The assessee is a firm engaged in the business of Dealing in Ball Bearing and Allied Materials etc. and derives income from Business & Profession. The case of the assessee was reopened on the basis of information received from the DGIT(Inv.), Mumbai in which it was conveyed that the assessee has taken the accommodation entries of bogus purchase in sum of Rs.52,047/- from the following two parties.
ITA No. 4760, 4759 & 4761/M/2018 A.Y.2009-10, 2010-11 & 2011-12 Name of the Party Amount Ankit Enterprises 10,795 Darshana Corporation 41,252 5. After the reply of the assessee, the AO restricted the addition to the extent of 100% of the bogus purchase in sum of Rs.52,047/-. The total income of the assessee was assessed to the tune of Rs.31,38,920/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who restricted the addition to the extent of 12.5% but the assessee was not satisfied, therefore, the assessee has filed the present appeal before us.
ITA. Nos. 1 to 3
We have heard the argument advanced by the Ld. Representative of the parties and perused the record. All the issues are in connection with the addition restricted to the extent of 12.5% by the CIT(A). Upon careful consideration we find that assessee provided the documentary evidence for the purchase. Adverse inference has been drawn due to the inability of the assessee to produce the suppliers. We find that in this case the sales have not been doubted. It is settled law that when sales are not doubted then hundred percent disallowance for bogus purchase cannot be done. No sale is possible without actual purchase. This proposition is supported from the decision of the Hon’ble jurisdictional High Court in the case of Nikunj eximp enterprises (in writ petition no 2860, order dt 18.6.2014. In the present case the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In such situation we are of the considered opinion on the facts and circumstances of the case that the 12.5% disallowance out of the bogus purchases meets the end of justice. However, in this regard learned counsel of the assessee has prayed that when only the
ITA No. 4760, 4759 & 4761/M/2018 A.Y.2009-10, 2010-11 & 2011-12 profits earned by the assessee on these bogus purchase transaction is to be taxed, the gross profit already shown by the assessee and offered to tax should be reduced from the standard 12.5% being directed to be disallowed on account of bogus purchase. 7. Up on careful consideration, we find considerable cogency in the submission of the learned counsel of the assessee, as otherwise it will be double jeopardy to the assessee. Accordingly, we modify the order of learned CIT-A and direct that the disallowance in this case to be restricted to 12.5% of the bogus purchases as reduced by the gross profit rate already declared by the assessee on these transactions. The assessee in the present case has already declared the G.P. @ 13.75% which is more than the 12.5%, therefore, there is no need to raise the disallowance. Accordingly, we delete the addition and allowed the appeal of the assessee.
ITA. NOS. 4759 & 4761/M/2018 8. The facts of the present case are quite identical to the facts of the case narrated above, however, the figure is different, therefore, there is no need to repeat the same. In these cases also the bogus purchase has been restricted to the extent of 12.5%. The finding given above is quite applicable to these cases also as mutatis mutandis. The gross profit has been shown @ 13.45% for the A.Y.2010-11 and gross profit has also been shown @ 12.70% for the A.Y. 2011-12. Accordingly, no demand could be raised if gross profit be reduced from the addition i.e. 12.5% of the bogus purchase. Accordingly, we delete the addition and allowed these appeals.
ITA No. 4760, 4759 & 4761/M/2018 A.Y.2009-10, 2010-11 & 2011-12 9. In the result, the appeals filed by the assessee are hereby ordered to be allowed accordingly. Order pronounced in the open court on 07/11/2019. Sd/- Sd/- (AMARJIT SINGH) (SHAMIM YAHYA) लेखध सदस्य / ACCOUNTANT MEMBER न्यधनिक सदस्य/JUDICIAL MEMBER मुंबई Mumbai; ददनांक Dated : 07/11/2019 Vijay Sr. P.S. आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : अपीलाथी / The Appellant 1. 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. दवभागीय प्रदतदनदध, आयकर अपीलीय अदधकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// (Sr. Private Secretary) आिकर अिीलीि अनर्करण, मुंबई / ITAT, Mumbai