ITO WARD 1 (2), KALYAN vs. MYPAL SUMERMALJI JAIN, MUMBAI

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ITA 6508/MUM/2018Status: DisposedITAT Mumbai04 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 held that while the assessee failed to discharge the onus of proving the genuineness of purchases by producing suppliers, the addition should be restricted to the profit element embedded in the transactions, not the entire purchase amount.

What were the facts?

The Revenue appealed against an order that restricted the addition for alleged bogus purchases to the estimated gross profit. The assessee, engaged in the yarn business, had claimed purchases from three entities, but failed to produce the suppliers to confirm the transactions.

What were the issues?

Whether the entire amount of alleged bogus purchases should be disallowed, or only the profit element embedded therein.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: HON’BLE SHRI C.N. PRASAD, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

For Respondent: Shri R. Bhoopathi – Ld. DR

1 Shri Mypal Sumermalji Jain Assessment Year :2011-12 आयकर अपीलीय अिधकरण “एक-सद" मामला ” "ायपीठ मुंबई म"। IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI माननीय "ी सी. एन. "साद,"ाियक सद" एवं माननीय "ी मनोज कुमार अ"वाल ,लेखा सद" के सम"। BEFORE HON’BLE SHRI C.N. PRASAD, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./ (िनधा"रण वष" / Assessment Year: 2011-12) ITO-Ward-1(2) Shri Mypal Sumermalji Jain 1st Floor IT Office 413, 1st Floor बनाम/ Mohan Plaza, Nr. Poddar School Shiv Darshan Building, Kasarali, Vs. Wayle Nagar, Kalyan (W)-421 301. Mahesh Park Gokul Nagari, Bhiwandi-421 302. "थायीलेखासं./जीआइआरसं./PAN/GIR No. AFIPJ-8188-H (अपीलाथ"/Appellant) (""थ" / Respondent) : Assessee by : None Revenue by : Shri R. Bhoopathi – Ld. DR सुनवाई की तारीख/ : 04/12/2019 Date of Hearing घोषणा की तारीख / : 04/12/2019 Date of Pronouncement 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’] 2011-12 contest the order of Ld. Commissioner of Income- Tax (Appeals)-2, Pune, [in short referred to as ‘CIT(A)’] Appeal No. 562/2017-18 dated 06/08/2018. It is evident from grounds of appeal that 2 Shri Mypal Sumermalji Jain Assessment Year :2011-12 the sole issue that arises for our consideration is addition on account of alleged bogus purchases.

2. None has appeared for assessee and no valid adjournment application is on record and hence, the matter was proceeded with ex- parte qua the assessee on the basis of material on record and after hearing learned departmental representative, who supported the stand of Ld.AO. 3.1 Facts on record would reveal that the assessee being resident individual assessee stated to be engaged in the business of yarn, was assessed for impugned AY u/s. 143(3) r.w.s. 147 on 27/02/2015 wherein the income of the assessee was determined at Rs.19.30 Lacs, after sole addition of alleged bogus purchases for Rs.17.63 Lacs as against returned income of Rs.1.67 Lacs e-filed by the assessee on 28/09/2011 which was processed u/s 143(1). 3.2 Pursuant to receipt of certain information from Sales Tax Department, it was alleged that the assessee obtained bogus purchases bills amounting to Rs.17.63 Lacs from 3 entities, the details of which have already been extracted at para-3 of the quantum assessment order. Accordingly, the case was reopened as per due process of law vide issuance of notice u/s 148 on 17/07/2013 which was followed by statutory notices u/s 143(2) & 142(1) wherein the assessee was directed to substantiate the purchase transactions. 3.3 Although the assessee defended the purchases but failed to produce any of the suppliers to confirm the transactions. Notices issued u/s 133(6), to confirm the transactions, did not elicit satisfactory 3 Shri Mypal Sumermalji Jain Assessment Year :2011-12 response. Consequently, the said purchases were disallowed and added to the income of the assessee.

4.

The learned CIT(A), after weighing the factual matrix in terms of ratio of various judicial pronouncements, came to a conclusion that the additions were to be restricted to the extent of estimated gross profit earned by the assessee on these transactions. The said estimation was made @20% and the balance additions were deleted. Aggrieved, the revenue is in further appeal before us.

5.

After careful consideration, 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. However, at the same time, the assessee failed to produce any of the suppliers to confirm the transactions. The onus casted upon assessee, in this regard, remained undischarged.

6.

The stated factual matrix, in our considered opinion, would make it a fit case not to disallow entire purchases but the addition, 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 the estimation of 20% to be quite fair and reasonable, we confirm the same.

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