ITO 27 (3)(5), MUMBAI vs. VRAJLAL MANILAL SHAH, MUMBAI

PDF · subscribers
ITA 6879/MUM/2018Status: DisposedITAT Mumbai19 December 2019AY 2011-124 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 confirmed the CIT(A)'s decision to restrict the addition to 12.5% of the alleged bogus purchases, finding it to be a reasonable estimation to meet the ends of justice. The Revenue failed to disprove the factual aspects noted by the CIT(A).

What were the facts?

The AO received information about the assessee making purchases from hawala parties, totaling ₹10,02,782. The AO added the entire amount as unproved purchases, but the CIT(A) restricted the addition to 12.5% of the bogus purchases.

What were the issues?

Whether the addition for bogus purchases should be the full amount or an estimated profit rate. Whether the CIT(A) was justified in restricting the addition to 12.5% of the bogus purchases.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SRI MAHAVIR SINGH

For Appellant: Shri Akhtar H. Ansari, DR
Hearing: 19.12.2019Pronounced: 19.12.2019

अपीलार्थी की ओर े / Appellant by : Shri Akhtar H. Ansari, DR प्रत्यर्थी की ओर े / Respondent by : Ms Dinkle Hariya, AR ुिवाई की तारीख / Date of hearing: 19.12.2019 घोर्णा की तारीख / Date of pronouncement : 19.12.2019 आदेश / O R D E R महावीर ससुंह, न्याययक सदस्य/ PER MAHAVIR SINGH, JM:

This appeal of the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)]-25, Mumbai [in short CIT(A)], in Appeal No. CIT(A)-25/IT-190/2015-16/270 dated 04.09.2018. The Assessment was framed by the Income Tax Officer, Ward-27(3)(5), Mumbai (in short ITO / AO) for the A.Y. 2011-12 vide order dated 09.03.2015 under section 143(3) read 2 | P a g e Vrajlal Manilal Shah with section 147 of the Income-tax Act, 1961 (hereinafter ‘the Act’).

2.

The only issue in this appeal of Revenue is against the order of CIT(A) restricting the addition made by the AO by applying the profit rate at the rate of 12.5 % of the bogus purchases.

3.

Briefly stated facts are that the assessee engaged in the business of manufacturing of Vaccum Forming/ Termo Forming of Plastic items. The AO received information from DGIT (Investigation), who in turn received information from Sales Tax Department, Mumbai that the assessee has made purchases from hawala parties, as listed in hawala dealers by the Maharashtra Sales Tax Department who are providing bogus bills of purchase amounting to ₹10,02,782/- as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: - “Sl Name of party Amount No. 1. Vardhman Traders 3,03,188 2. Shradhha Trading Co. 3,40,494 3. Varun Enterprises 3,59,100 Total 10,02,782 4. During the course of assessment proceedings and during appellate proceedings, the assessee submitted all the documentary evidences such as inward register, stock register, payment received against such sales, receipt of material purchases, account payee cheque. According to the AO, the assessee failed to establish the genuineness of the purchase and accordingly, he made addition the whole amount as 3 | P a g e Vrajlal Manilal Shah unproved purchases to ₹10,02,782/- to the return income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who restricted the disallowance at 12.5% of the bogus purchases by observing in para as under: - “6. In view of the above discussed factual matric and precedents, I am of the view that estimation of 12.5% as profit embedded in impugned purchases shown from the alleged hawala party and adding the same to the total income returned, would meet the end of justice. Therefore, I direct the AO to estimate profit @12.5% of the alleged bogus purchases, which works out to ₹1,25,347 (@12.5% of ₹10,02,782/-) and restrict the addition to ₹1,25,347/-. The appellant gets a relief for the balance amount of ₹8,77,435/- (₹10,02,782-₹1,25,347/-.

Hence, grounds of appeal No.1,2 & 3 are partly allowed.”

5. I have considered the issue and gone through the facts and circumstances of the case. I noted the facts from the assessment order and also from CIT(A)’s that the assessee submitted the ledger accounts of the above parties and bank statements extracts evidencing the payments through bank cheque. I noted that facts of this case are similar to the case of Hon'ble High Court of Gujarat in the case of Simit P Seth V CIT 4 | P a g e Vrajlal Manilal Shah (2013) 356 ITR 451(Guj) wherein it had on occasion to deliver its judgment by confirming the decision of the ITAT which has estimated the disallowance at 12.5% of the disputed bogus purchases to meet the end of Justice. Even now before me also revenue could not dislodge the factual aspects noted by CIT(A). I find that the CIT(A) has rightly applied the profit rate at the rate of 12.5% and I confirm the same. This issue of Revenue’s appeal is dismissed.

6.

In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 19.12.2019.

More judgments on Section 147

All 49,210 judgments and leading authorities on Section 147 →

Recent GST High Court judgments

Search GST case law →