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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SRI MAHAVIR SINGH
आयकर अपीलीय अधिकरण “SMC” न्यायपीठ म ुंबई में। IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI श्री महावीर स िंह, न्याययक दस्य BEFORE SRI MAHAVIR SINGH, JUDICIAL MEMBER आयकर अपील सुं./ (यिर्ाारण वर्ा / Assessment Year 2011-12) The Income Tax Officer Rajesh C. Dixit Ward 33(3)(1), Shop No.8, Ground Floor, बनाम/ Room No.602, 6th floor, C-12 Shree Naman Plaza, S.V. Pratyakshakar Bhavan, BKC, Road, Kandivali (W), Vs. Mumbai-400 051 Mumbai-400 067 (अपीलार्थी / Appellant) (प्रत्यर्थी/ Respondent) स्र्थायी लेखा सुं./PAN No. AAHPD3896J अपीलार्थी की ओर े / Appellant by : Shri Akhtar H. Ansari, DR प्रत्यर्थी की ओर े / Respondent by : Shri Nitesh Joshi, AR ुिवाई की तारीख / Date of hearing: 17.12.2019 घोर्णा की तारीख / Date of pronouncement : 17.12.2019 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)]-53, Mumbai [in short CIT(A)], in Appeal No. CIT(A)-53/IT-168/ITO-21(1)(4)/2018-19 2 | P a g e Rajesh C. Dixit order dated 07.09.2018. The Assessment was framed by the Income Tax Officer, ward-21(1)(4), Mumbai (in short ITO / AO) for the A.Y. 2011-12 vide order dated 10.02.2014, under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of Revenue is against the order of CIT(A) restricting the addition of profit rate at the rate of 10% as against made by the AO at the rate 25% of the bogus purchases. For this Revenue has raised following grounds: - “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), Mumbai erred in randomly restricting the disallowance made by AO to 10% of the bogus purchases without carrying out any investigation or proper examination of facts of the case.
2. On the facts and in the circumstances of the case and in lase, the Ld. CIT(A), Mumbai erred in ignoring the fact that investigations were carried out by the Assessing Officer and it was the findings of the independent investigations which proved that the purchases were bogus.”
3 | P a g e Rajesh C. Dixit 3. Briefly stated facts are that the assessee engaged in the business of Trading in chemical & Pharmaceuticals. 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 ₹5,87,998/- as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: - “Sl Name of party Amount No.
Darshan Enterprises 5,87,998 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 of unproved purchase at 25% of Rs. 1,47,000/- to the return income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who restricted the disallowance at 10% of the bogus purchases by observing in para 5.7 as under: - “5.7 Even if materials have been purchased, they are not purchased from these parties and may be in cash from un- 4 | P a g e Rajesh C. Dixit disclosed parties. By purchasing from the grey market, the appellant would have benefitted by the savings of taxes. The Tax audit Report states that the appellant is a reseller of pharmaceuticals and chemical items and in item 28 it is mentioned that quantitative details is not maintained. Thus the disallowance is warranted in this case. Further in the absence of quantitative details, there is no way of identifying items of purchase standing in closing stock. A perusal of the appellate orders filed by the appellant in its own case shows that in the orders dated 21.03.2018/22.03.2018, the Ld. CIT(A) -45 Mumbai has reduced the disallowance from 25% to 10%. This includes AY 2010-11 which has been referred to by the assessing officer. Therefore, in fact and circumstances of the case, in this particular case, and for consistency, it is considered most appropriate to adopt 10% profit which can take care of the rotation of capital utilized for such transaction. Thus the grounds of appeal No. 2 to 5 are partly allowed as above.”