ITO 33 (3)(3), MUMBAI vs. SARIKA VISHNUPRASAD RAI, MUMBAI

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ITA 6880/MUM/2018Status: DisposedITAT Mumbai17 December 2019AY 2011-126 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 disallowance to 12.5% of the bogus purchases. The Tribunal noted that payments were made by cheque and relied on a Gujarat High Court judgment that estimated a similar disallowance.

What were the facts?

The Revenue appealed against the CIT(A)'s order which restricted the addition of profit rate on bogus purchases from 25.50% to 12.5%. The AO had made the addition based on information that the assessee made purchases from hawala parties providing bogus bills.

What were the issues?

Whether the CIT(A) erred in restricting the addition on bogus purchases to 12.5% without proper reasoning, and whether the relief was granted despite the assessee's voluntary acceptance of a higher addition.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SRI MAHAVIR SINGH

For Appellant: Shri Akhtar H. Ansari, DR
Hearing: 17.12.2019Pronounced: 17.12.2019

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 Smt. Sarika Vishnuprasad Rai Ward-33(3)(3), R.No. 603, 5104, Mercury, Evershine बनाम/ 6th floor, C-12, Pratyakshakar city, Thakur Village, Kandivali Bhavan, BKC, (East), Kumbai-400 101 Vs. Mumbai-400 051 (अपीलार्थी / Appellant) (प्रत्यर्थी/ Respondent) स्र्थायी लेखा सुं./PAN No. ADXPR4306A अपीलार्थी की ओर े / Appellant by : Shri Akhtar H. Ansari, DR प्रत्यर्थी की ओर े / Respondent by : None ुि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)]-45, Mumbai [in short CIT(A)], in Appeal No. CIT(A)-45/ITO-33(3)(3)/ITA-46/2016-17 2 | P a g e Sarika Vishnuprasad Rai order dated 27.08.2018. The Assessment was framed by the Income Tax Officer, ward-33(3)(3), Mumbai (in short ITO / AO) for the A.Y. 2011-12 vide order dated 11.01.2016, under section 143(3) 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 of profit rate at the rate of 12.5 % as against made by the AO at the rate 25.50% of the bogus purchases. For this assessee has raised following grounds: - “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in randomly restricting the disallowance at 12.5% of the bogus purchases without any proper reason or logic?

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in giving the relief of 12.5% of the bogus purchases to the assessee without appreciating the fact that the Authorised Representative of the assessee voluntarily accepted the addition of 25% of the bogus purchases.”"

3. Briefly stated facts are that the assessee engaged in the business of manufacturing of rubber and engineering 3 | P a g e Sarika Vishnuprasad Rai component & resale of sheet material, rubber, plastics & polymers. 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 ₹12,46,252/- as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: - “Sl Name of party Amount No. 1. Ambika Sales Corporation 12,46,252/- 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 whole amount as unproved purchase at Rs. 12,24,642/- 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 5.1 as under: - “5.1 I have considered the assessment order and the submission of the assessee. The AO observed in the assessment order 4 | P a g e Sarika Vishnuprasad Rai and the submission of the assessee did not produce the details to prove the genuineness of the purchases but the payment was made by way of cheques and they were deposited in the accounts of the alleged hawala dealers. The assessee did not furnish Delivery Challans, Transport receipt, Octoroi Receipt etc. to prove the delivery of goods. Even he did not produce the parties and latest address of the parties. In the circumstances it appears that the assessee purchased goods from local grey market and obtained accommodation bills in lieu of the goods with him to make some additional profit, which can be brought to tax. However the 25.50 appears to be on higher side. Keeping in view the totality of facts and circumstances of the case, the GP percentage estimated by AO is restricted to 12.5%. The AO is directed to modify the addition accordingly. The appellant gets part relief. This ground is partly allowed.”

5 | P a g e Sarika Vishnuprasad Rai 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 (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 17.12.2019.

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