Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: Shri Shamim Yahya (AM) & Shri Pawan Singh (JM)
O R D E R Per Pawan Singh, JM : 1. These appeals by assessee are directed against the identical orders of ld. CIT(A)-29, Mumbai both dated 18-04-2016 for Assessment Years 2008-09 & 2009-10. In both the appeals, the assessee has raised identical grounds of appeal except variation of figure. Facts for both the Assessment Years are identical except variation of alleged bogus purchases and disallowances thereof @ 12.5% of such purchases. Therefore, both the appeals were clubbed, heard together and are decided by common order. For appreciation of facts in appeal for Assessment Year 2008-09 was treated as lead case. In appeal for Assessment Year 2008-09, the assessee has raised the following grounds of appeal:
2 ITAs 5515 & 5516/Mum/2018 “1. On the facts and circumstances of the case and in law the Ld CIT(A) erred in confirming the initiation of the reassessment proceeding under section 147.
2. On the facts and circumstances of the case and in law the Ld CIT(A) failed to consider that reassessment proceeding cannot be initiated. a) No reassessment can be made just to make an enquiry or verification. b| Reassessment proceeding cannot be initiate merely on the information received from investigation wing. c) Reassessment proceeding cannot be initiated when the LD. CIT(A) have reason to suspect and not reason to believe.
3. On the facts and circumstances of case and law the Ld CIT(A) erred in confirming the assessment order under section 143 sub section 3 r w s 147 of income tax Act which is passed against the principal of natural justice.
4. The Ld CIT(A) erred in confirming and treating Rs.1,97,470/- being 12.5 percent of the total purchases of Rs. 15,79,760/- as bogus non- genuine expenditure and thereby erred in adding the same to the total income of the assessee. 5 The Ld. CIT(A) erred in confirming the charging of interest under section 234A, 234B 234C and 234D of the Income Tax Act 1961.
The Ld. CIT(A) erred in confirming the initiation of the penalty proceeding under section 271(1 )(c) of the Income Tax Act 1961.”
Brief facts of the case are that the assessee, proprietor of M/s Sonu Metal Distributors and is dealing in ferrous and non-ferrous metals, filed its return of income for AY 2008-09 on 11-09-2008 declaring total income at Rs.9,10,770/-. The return of income was processed under section 143(1) and was accepted on returned income.
Subsequently, the case was reopened on the basis of information received from the DGIT (Inv) that the assessee was one of the parties
3 ITAs 5515 & 5516/Mum/2018 involved in receiving accommodation entries from bogus / hawala dealers, the Assessing Officer made a belief that the income of the assessee escaped assessment. Notice under section 148 dated 16.03.2015 was issued and served upon the assessee. The assessee, vide letter dated 04-03-2016 stating to consider original return filed as return filed in response to notice u/s 148. The Assessing Officer after serving notice under section 143(2) / 142(1) dated 04-03.2016 proceeded for re-assessment. During the assessment, it was found that assessee had made purchases of Rs.15,79,760/- from Shree Sundha Steels Pvt Ltd which was the suspicious purchase. The AR of the assessee was accordingly asked to produce the evidence to establish that goods have actually been delivered / supplied. The assessee was also asked to furnish its explanation on the purchases purported to have made from the aforesaid party and the details of brokers / agents through whom purchases were claimed to have been made by the assessee including name, address, contact number, etc to prove the genuineness of the transaction. The assessee was also showcaused to explaine why expenditure claimed in respect of purchases shown to have made from the aforesaid dealer should not be disallowed. The assessee explained that the payments were made by account payee cheque. Similarly details of corresponding sales of goods were also 4 ITAs 5515 & 5516/Mum/2018 called for and to link the purchase with sales supported by bills and vouchers and reflection in the stock register of its entry and exit item by item. The assessee was also asked to produce books of accounts, bills and vouchers for verification. The assessing officer observed that though few details were furnished, but it could not link the purchases with corresponding sales and books of account were also not produced for verification and hence no verification could be made. Therefore, after analysis of facts of the given case as discussed above, he held that 12.5% was the quantum of profit element involved on account of non-genuine purchase of Rs.15,79,760/-, would meet the ends of justice. Accordingly, an amount of Rs.1,97,470/- was disallowed and added to the total income of the assessee.
On appeal, the Ld.CIT(A) found the disallowance at 12.5% on the alleged bogus purchases to be reasonable. Therefore, he upheld the addition. Further aggrieved, the assessee filed this appeal.
We have heard the submissions of the learned authorised representative (AR) of the assessee and the learned departmental representative (DR) for the revenue. The ld AR for the assessee submits that the assessee furnished the entire evidences to substantiate the genuineness of the purchases. The assessing officer has not discussed the evidences furnished by the assessee. No investigation
5 ITAs 5515 & 5516/Mum/2018 was conducted by the assessing officer. The assessing officer vaguely held that the assessee furnished few details and could not link the purchases. The ld CIT(A) confirmed the action of the assessing officer that the disallowance is reasonable. The ld AR for the assessee subits that the assessee has already shown GP of 4.43% on genuine purchases. It was argued that the GP on alleged non-genuine is only 3.91% only. The ld. AR of the assessee further submits that the Hon’ble Bombay High Court in a recent decision on similar set of fact in PCIT vs. M Haji Adam & Co. in of 2016 dated 11.02.2019 held that addition in respect of bogus purchases is to be limited to the extent of bringing the GP rate on such purchase at the same rate as on other genuine purchases. The ld. AR of the assessee submits that the disallowance of alleged bogus purchase may be restricted in accordance with the decision of Hon’ble jurisdictional High Court in PCIT vs. M Haji Adam & Co. (supra).
On the other hand, the ld. Departmental Representative (DR) for the revenue supported the order of lower authorities. The ld. DR further submits that Investigation Wing of Income-tax Department has made full-fledged investigation in respect of hawala traders. The hawala traders were/are engaged in providing bogus bill without actual delivery of goods. The assessee has shown bogus purchases only to 6 ITAs 5515 & 5516/Mum/2018 inflate the profit. The ld. DR for the revenue submits that the Assessing Officer has given sufficient relief. The Assessing Officer has reasonably estimated the disallowances. The assessee is not entitled for any further relief. 6. We have considered the submissions of both the representatives and perused the record. A short issue for our adjudication is whether the disallowance of alleged bogus purchase @ 12.5% is reasonable or not.
The ld. AR of the assessee has vehemently relied upon the decision of Hon’ble jurisdictional High Court in M Haji Adam & Co.(supra). We have noted that on similar set of fact, the Hon’ble Bombay High Court in PCIT vs. M Haji Adam & Co. (supra) held that addition in respect of bogus purchase be limited to the extent of bringing the GP rate on bogus purchase at the same rate as other genuine purchases. We have further noted that the assessee has shown GP of 4.43% on genuine purchases. It was argued that the GP on alleged non-genuine is only 3.91%. Therefore, considering the fact of the present case and the nature of business activities of the assessee and by following the decision of Hon’ble Bombay High Court, we direct the Assessing Officer to restrict the addition with regard to bogus purchases by brining the GP rate on such purchases at the same rate as that of other genuine purchases. Needles to say that before making addition, the 7 ITAs 5515 & 5516/Mum/2018 Assessing Officer shall grant opportunity to the assessee before passing the order in accordance with law. 7. In the result, appeal of the assessee is partly allowed. (AY 2009-10) 8. The facts and circumstances in this appeal run para materia to the appeal for assessment year 2008-09 in , which we have already decided above. The grounds of appeal raised in this appeal also identical to appeal for AY 2008-09. Therefore, the decision arrived at against appeal for AY 2008-09 applies mutatis mutandis to this appeal also.
9. In the result, appeal of the assessee is partly allowed.
10. As a result, both the appeals filed by the assessee are partly allowed. Order pronounced in the open court on 01-11-2019. Sd/- Sd/- (Shamim Yahya) (Pawan Singh) ACCOUNTANT MEMBER JUDICIALMEMBER Mumbai, Dt : 1st November, 2019 Pk/- Copy to :
1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order Asstt. Registrar, ITAT, Mumbai 8 ITAs 5515 & 5516/Mum/2018
Initial Date 1. Draft dictated on 17-10 Sr.PS 2. Draft placed before author 22-10 Sr.PS 3. Draft proposed & placed before the second member 4. Draft discussed/approved by Second Member. 5. Approved Draft comes to the Sr.PS/PS 6. Kept for pronouncement on 7. File sent to the Bench Clerk 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order. 11. Draft dictation sheets are attached Sr.PS