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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: HON’BLE SHRI SAKTIJIT DEY, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
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)- 25/IT-325/2015-16/178 dated 12/07/2018 on following grounds of appeal: - Rajesh Rupo Jagasia Assessment Year-2010-11 1. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs.11,97,512/- made by the Assessing Officer on account of bogus purchases, without appreciating the fact that the assessee had failed to produce bills, vouchers and other documentary evidences in support of his claim and without considering the latest Apex Court decision in the case of N.K.Proteins Ltd. wherein it is held that once it is proved that the purchases are bogus then additions should be made on entire purchases and no on profit element embedded in such purchases.
2. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in estimating the profit from Hawala purchases by disallowing only Rs.1,71,073/- being 12.5% of the bogus purchases as even the basic onus of producing delivery challans, transport bills etc. were not fulfilled by the assessee.
The assessee’s representative sought adjournment in the matter which was declined. Therefore, the matter was proceeded with ex-parte qua the assessee after perusal of material on record and after considering the arguments advanced by the revenue. 2.1 Facts on record would reveal that the assessee being resident individual stated to be engaged as paint contractor and dealer in hardware items under proprietorship concern namely M/s Krishraj, was assessed for impugned AY u/s. 143(3) r.w.s. 147 on 25/03/2015 wherein the income of the assessee was determined at Rs.35.64 Lacs, after sole addition of alleged bogus purchases for Rs.13.68 Lacs as against returned income of Rs.21.96 Lacs filed by the assessee on 15/10/2010 which was processed u/s.143(1). 2.2 Pursuant to receipt of certain information from Sales Tax Department, Govt. of Maharashtra, it transpired that the assessee obtained bogus purchases bills amounting to Rs.13.68 Lacs from an entity namely M/s Universal Suppliers. Accordingly, the case was reopened as per due Rajesh Rupo Jagasia Assessment Year-2010-11 process of law vide issuance of notice u/s 148 on 24/03/2014 which was followed by statutory notices u/s 143(2) and 142(1) wherein the assessee was directed to substantiate the purchase transactions.
The assessee defended the purchases by furnishing purchase details etc. but failed to produce the supplier for confirmation of transactions. Notice issued u/s 133(6) to the said supplier remained un-responded to. The factual matrix led the Ld. AO to form an opinion that the purchases were not genuine. It was also observed that since the sales were not suspected, the goods must have been procured from the open market in cash and therefore, the disallowance would be justified u/s 40A(3) also. Therefore, the stated purchases were disallowed and added back to the income of the assessee u/s 69C.
Before learned first appellate authority, the assessee agitated the addition by way of an elaborate submissions. It was, inter-alia, contended that the payments were through banking channels and the sales were not under doubt. After considering the factual matrix and assessee’s submissions, Ld. CIT(A) opined that the correct approach would be to estimate the additional benefit or profit earned on these purchases and not to disallow the entire purchases. Finally, relying upon the decision of Hon’ble Gujarat High Court rendered in CIT V/s Simit P.Sheth 356 ITR 451 and CIT V/s Bholanath Poly Fab Pvt Ltd. of 2012 23/10/2012, the impugned additions were restricted to 12.5% of the disputed purchases. Aggrieved, the revenue is in further appeal before us. It appears that the assessee has accepted the verdict of Ld. first appellate authority.
Rajesh Rupo Jagasia Assessment Year-2010-11 5. After careful consideration of orders of lower authorities and after appreciating the arguments advanced by revenue, we are of the considered opinion that 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 / disturbed by the revenue. However, at the same time, the assessee miserably failed to substantiate the delivery of material during assessment as well as appellate proceedings. The assessee failed to produce the stated supplier to confirm the transactions and the onus casted upon assessee, in this regard, remained undischarged. Therefore, on the given facts and circumstances, disallowance of entire 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 no infirmity in the impugned order, we dismiss the appeal.
So far as the decision of Hon’ble Gujarat High Court rendered in N.K. Industries Ltd. Vs DCIT [72 Taxmann.com 289] is concerned, we find that the facts of that case has already been distinguished by Hon’ble Bombay High Court in Pr.CIT Vs. M/s Mohommad Haji Adam & Co. [ITA No.1004 & others of 2016, dated 11/02/2019] wherein Hon’ble Court has Rajesh Rupo Jagasia Assessment Year-2010-11 approved the estimation, on similar factual matrix, based on Gross Profit Rate. Therefore, concurring with the approach of Ld. CIT(A), we dismiss the appeal.
Finally, the appeal stands dismissed.