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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: Shri Shamim Yahya (AM) & Shri Pawan Singh (JM)
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC”, MUMBAI Before Shri Shamim Yahya (AM) & Shri Pawan Singh (JM) ITA No. 5961/Mum/2018(A : 2009-10)
ITO 27(2)(1), Mumbai vs M/s K.L. Industries 1001-B, Vikhroli (W) Mumbai 400 083 PAN : AAFK2680A APPELLANT RESPONDEDNT
Appellant by Shri Akhtar H Ansari Sr DR Respondent by None Date of hearing 26-11-2019 Date of pronouncement 04-12-2019
O R D E R Per Pawan Singh, JM : 1. This appeal filed by the revenue is directed against the order of the
CIT(A)-26, Mumbai dated 04-07-2018. The revenue has raised the
following grounds of appeal:-
“1. On the facts and circumstances of the case and in law the Id CIT(A) erred in deleting the addition of Rs.60,386/-made by assessing officer on account of bogus purchases, without appreciating the fact that the assessee had failed to produce bills, vouchers and others documentary evidences in support of its claim and without considering the latest Apex court decision in the case of N.K. Protein Ltd. Wherein it is held that once it is proved that the purchases are bogus then addition should be made on entire purchases and not 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.10,656/-being 15% of the bogus purchases as even the basic onus of producing delivery challans, transportation details etc were not fulfilled by the assessee. The appellant prays that
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the order of the CIT(A) on the Above grounds be reversed and that of the assessing Officer be restored.
The brief facts of the case are that the assessee, a partnership firm
engaged in the business of manufacturing in steel tubular poles, etc.
filed its return of income for the assessment year 2010-11 on 21-09-
2010 declaring total income at Rs.3,51,920/-. The return was
processed u/s 143(1) of the Income-tax Act, 1961. The assessment was
re-opened under section 147 on the basis of information received from
Sale Tax Department, Government of Maharashtra that certain hawala
operators are indulging in providing accommodation bills without
actual delivery of goods. The Sale Tax Department, Government of
Maharashtra referred the list of such hawala dealers and the beneficiary
to the DGIT (Investigation), Mumbai. The name of assessee appeared
in the list of beneficiaries. The assessee allegedly made the purchases
of Rs.71,042/- from such hawala dealers. On the basis of information,
the Assessing Officer made a belief that the income of the assessee
escaped assessment, therefore, re-opened the assessment under section
Notice under section 148 dated 26-03-2015 was issued to the
assessee. However, the assessee, vide letter dated 16-04-2015
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submitted that the return filed on 21-09-2010 may be treated as return
having been filed in response to notice u/s 148 of the Act.
Subsequently, The Assessing Officer thereafter issued a notices u/s
143(2) and 142(1) alongwith a questionnaire. During the assessment,
the Assessing Officer noted that the assessee has shown purchases
from the following parties, which was declared as hawala dealers by
the Sale Tax Department, Government of Maharashtra:
Name of the parties Bill amount (Rs.) 1 Riddhi Enterprises 71,042/- Total 71,042/-
The assessing officer issued notices u/133(6) to the above parties, but
all the notices returned unserved by the postal authorities with the
remark, “left”. Therefore, the Ward Inspector was deputed to make
enquiry and the local enquiry also failed to throw any light on the
whereabouts of the parties. This fact was brought to the notice of the
assessee by the assessing officer. The assessee was asked to produce
the parties, alternatively also show cause as to why the purchases made
from the above party should not be disallowed as unexplained
expenditure. As the assessee failed to furnish evidence such as,
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delivery challans, transportation details, etc. to substantiate his claim of
purchases from aforesaid parties, the assessing officer, relying upon the
decision of ITAT, Jaipur Bench in the case of Kachwala Gems vs JCIT
in ITA No.134/JP/2002 dated 10-12-2003 made addition of 100% of
the amount of alleged bogus purchases to the total income.
On appeal, the ld. CIT(A), on finding that the GP ratio of the assessee
for the last three years ranged from 12.07% to 16.41%. The Ld.
CIT(A) accordingly restricted the addition to the extent of 15% of such
alleged bogus purchases being the profit element embedded in such
purchases, by relying upon the decision of Hon’ble Gujarat High Court
in CIT vs Simit P Sheth 356 ITR 451 (Guj). Aggrieved by the
order of ld. CIT(A), the revenue has filed the present appeal before us.
None appeared on behalf of the assessee before us. The notice of
hearing sent by RPAD has been returned by the postal authorities with
the remark, “left”. Therefore, we are left with no alternative but to
hear the Ld. DR for the revenue and dispose of the appeal on the basis
of material available on record. The ld DR submits that the ld CIT(A)
granted relief to the assessee despite the facts that the assessee failed to
prove the genuineness of the purchases during the assessment
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We have considered the submissions of the Ld. DR for the revenue and
perused the material available on record. The Ld. DR heavily relied
upon the order of the assessing officer. However, we find that the
decision arrived at by the Ld. CIT(A) in restricting the addition to the
extent of profit element embedded in such bogus purchases at 15% is
in conformity with the decision of the Hon’ble Gujarat High Court in
CIT vs Simit P Sheth(supra) and other decisions mentioned in his
order. We have noticed that neither the AO has not rejected the sales of
the assessee, nor statement of accounts maintained by assessee was
rejected. The assessing officer disallowed the entire amount of
purchases. We are of the considered opinion that under Income Tax
Act only real income can be taxed by the Revenue. We may further
note that even in cases where the whole transaction is not verifiable
due to various reasons, the only taxable is the taxable income
component and not the entire transaction. The Hon’ble Bombay High
Court in the case of “CIT vs. Hariram Bhambani” in ITA No.313 of
2013 decided on 04.02.15 held that the Revenue is not entitled to bring
the entire sales consideration to tax, but only the profit attributable on
the total unrecorded sale consideration alone can be subject to income
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tax. We have noted that the ld CIT(A) reasonably disallowed the
purchase, which is sufficient to prevent the revenue leakage. No other
contrary decision has been brought to our notice by the Ld. DR so as to
enable us to come to a different conclusion than the one arrived at by
the Ld. CIT(A). Therefore, in this view of the matter, we uphold the
order of the Ld. CIT(A) and dismiss the appeal filed by the revenue.
In the result, appeal of the revenue is dismissed.
Order pronounced in the open court on 04-12-2019.
Sd/- Sd/- (Shamim Yahya) (Pawan Singh) ACCOUNTANT MEMBER JUDICIALMEMBER Mumbai, Dt : 4th December, 2019 Pk/- Copy to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR /True copy/ By order
Asstt. Registrar, ITAT, Mumbai