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Income Tax Appellate Tribunal, “H” Bench, Mumbai
Before: Shri Ravish Sood & Shri N.K. Pradhan
O R D E R
PER RAVISH SOOD, JM
The present appeal filed by the revenue is directed against the order passed by the CIT(A)-42, Mumbai, dated 28.06.2018, which in turn arises from the order passed by the A.O under Sec.143(3) r.w.s 147, dated 29.01.2016 for A.Y. 2010-11. The revenue has assailed the impugned order by raising before us the following grounds of appeal: “1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in addition of Rs.3,10,853/- made on account of bogus purchases from hawala parties as detected by Sales Tax Department to the extent of Rs. 38,854/- being12.5% of the bogus purchases.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in restricting the addition on account of bogus purchases to the extent of 12.5% without appreciating the ratio of decision in the case of N.K. Proteins Ltd [250 taxman 22(SC)].
3. Tax Effect is below monetary limit but it is covered within exception provided in CBDT Circular No.03/2018 dated 11.07.2018 as further amended by CBDT letter dated 20.08.2018. P a g e | ACIT-31(2) Vs. M/s Kakkar And Brothers
4. The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.
4. The appellant craves leave to amend or to alter any ground or add a new ground, which may be necessary.”
2. Briefly stated, the assessee firm which is engaged in the business of manufacturing of writing instruments had filed its return of income for A.Y. 2011-12 on 29.09.2011, declaring total loss of Rs.34,25,197/-. On the basis of information received from the DGIT(Inv.), Mumbai, that the assessee as a beneficiary had obtained accommodation purchase bills, the case of the assessee was reopened under Sec. 147 of the Act.
3. During the course of the assessment proceedings it was observed by the A.O that the assessee had claimed to have made purchases of Rs.3,10,853/- from a tainted party, as under:
Hawala Tin Hawala Name Hawala PAN F.Y. Amount 27800298365V Mahavir Sales AMMPM3778R 2010-11 3,10,853/- Corporation Total 3,10,853/- As the assessee failed to substantiate the genuineness and veracity of the purchases claimed to have been made from the aforementioned party, therefore, the A.O characterised the same as a bogus purchase transaction. Notice issued under Sec.133(6) by the A.O to the aforesaid party was returned by the postal authorities with the remarks “not known”. On the basis of the aforesaid facts, the A.O added the entire value of purchase of Rs.3,10,853/- as bogus/ingenuine purchases in the hands of the assessee.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). Observing, that the assessee had actually received the goods pertaining to the purchases which were claimed to have been made from the aforementioned party, the CIT(A) was of the view that the addition in the hands of the assessee was liable to be restricted only to the extent of 12.5% of the aggregate value of purchases of Rs.3,10,853/-. Accordingly, the CIT(A) restricted the addition to an amount of Rs.38,857/-.
The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. As the assessee respondent despite having been put to notice had failed to appear before us, therefore, we proceed with the matter as per Rule 25 of the Appellate Tribunal Rules, 1963, and dispose off the appeal after hearing the appellant revenue. As is P a g e | ACIT-31(2) Vs. M/s Kakkar And Brothers discernible from the orders of the lower authorities the assessee had failed to substantiate the authenticity of the purchase transaction under consideration. Although, the A.O had added the entire purchases of Rs.3,10,853/-, however, the CIT(A) taking cognizance of the fact that the material pertaining to the purchase under consideration had actually been received by the assessee, therefore, he had restricted the addition only to the extent of the profit embedded in making of such purchases by the assessee from unidentified sources operating in the open/grey market. We have given a thoughtful consideration and find no infirmity in the order of the CIT(A). In our considered view, it is not the case of the revenue that the goods received in context of the aforesaid impugned purchases had not been accounted for by the assessee in its sales/closing stock for the year under consideration. Also, it is not the case of the revenue that the „trading results‟ of the assessee for the year under consideration had witnessed a serious decline as in comparison to the preceding years, which would evidence that the impugned purchases do not form part of its sales/closing stock for the year under consideration. Accordingly, we are in agreement with the view taken by the CIT(A) that the addition in the hands of the assessee was liable to be restricted only to the extent of the profit element embedded in making of such purchases by the assessee from the open/grey market. As such, finding no infirmity in the view taken by the CIT(A) that the addition was liable to be confined to 12.5% of the aggregate value of the aforesaid purchases of Rs.3,10,863/-, we uphold his order.