ACIT-1, KALYAN vs. BHAVE ENGINEERING PRIVATE LIMITED, MUMBAI

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ITA 3886/MUM/2018Status: DisposedITAT Mumbai25 October 2019AY 2011-125 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 upheld the Commissioner (Appeals)'s decision to restrict the disallowance to 12.5% of the non-genuine purchases, considering that the assessee might have purchased goods from the grey market to avoid VAT.

What were the facts?

The Assessing Officer re-opened the assessment based on information from the Sales Tax Department alleging bogus purchases of Rs. 1,57,63,178. The assessee was unable to prove the genuineness of these purchases.

What were the issues?

Whether the entire amount of non-genuine purchases should be added back to the income, or only the profit element embedded therein.

Which sections of the Income-tax Act were involved?

Section 147,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI MANOJ KUMAR AGGARWAL

For Respondent: Shri Samatha Mullamudi

Date of Hearing – 30.09.2019 Date of Order – 25.10.2019

O R D E R PER SAKTIJIT DEY. J.M.

Aforesaid appeal by the Revenue is against order dated 20th March 2018, passed by the learned Commissioner of Income Tax (Appeals)–3, Nashik, for the assessment year 2011–12.

2.

The present appeal has been filed by the Revenue being aggrieved with the decision of the learned Commissioner (Appeals) in restricting the disallowance to 12.5% of the non–genuine purchases.

2 Bhave Engineering Pvt. Ltd.

3.

When the appeal was called for hearing, no one was present on behalf of the assessee to represent the case. Accordingly, we proceed to dispose off the appeal ex–parte qua the assessee after hearing the learned Departmental Representative and on the basis of material on record.

4.

Brief facts are, the assessee company is engaged in the business of manufacturing and trading of steel. For the assessment year under dispute, the assessee filed its return of income on 30th September 2011, declaring nil income. Initially, the return of income filed by the assessee was processed under section 143(1) of the Act. Subsequently, on the basis of information received from the Sales Tax Department, Government of Maharashtra, indicating that the assessee is a beneficiary of accommodation entries provided by three parties by way of bogus purchase bills amounting to ` 1,57,63,178, the Assessing Officer re–opened the assessment under section 147 of the Act. In the course of assessment proceedings, the Assessing Officer called upon the assessee to prove the aforesaid purchases through supporting evidences like stock register, mode of payment for the goods purchased, transportation bills and octroi challan, delivery challan, etc. Further, to independently verify the genuineness of such purchases, the Assessing Officer issued notices under section 133(6) of the Act which, as alleged by the Assessing Officer, returned back un–served.

3 Bhave Engineering Pvt. Ltd.

Further, the Assessing Officer after verifying the evidences furnished by the assessee, was of the opinion that the assessee was unable to prove the genuineness of purchases through proper documentary evidences. Accordingly, he treated the purchases of ` 1,57,63,178, as non–genuine added back to the income of the assessee. The assessee challenged the aforesaid addition before the first appellate authority.

5.

The learned Commissioner (Appeals), after considering the submissions of the assessee in the light of certain judicial precedents cited before him, restricted the addition to 12.5% of the non–genuine purchases.

6.

We have heard the learned Departmental Representative and perused the material on record. As could be seen from the facts on record, primarily relying upon the information received from the Sales Tax Department, Government of Maharashtra, the Assessing Officer has treated the disputed purchases as non–genuine and added back to the income of the assessee. However, it is a fact on record that the assessee has furnished the purchase bills, details of payment made through banking channel etc. Further, consumption of goods and sale of finished products shown by the assessee has not been disputed by the Assessing Officer. That being the case, it would be logical to conclude that the assessee might have purchased the goods from grey

4 Bhave Engineering Pvt. Ltd. market to avoid payment of VAT and to regularize such purchases has obtained accommodation bills. Under these circumstances, the entire purchases cannot be added back to the income of the assessee but only the profit element embedded therein can be considered for addition. Therefore, the approach of learned Commissioner (Appeals) in restricting the disallowance to 12.5% of the non–genuine purchases is not only just and proper but also in consonance with the view expressed by the Tribunal and the Hon’ble High Court in similar nature of cases. For the aforesaid reasons, we uphold the decision of learned Commissioner (Appeals) on the issue. Grounds are dismissed.

7.

In the result, appeal is dismissed. Order pronounced in the open Court on 25.10.2019

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