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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: HON’BLE SHRI MAHAVIR SINGH, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R
Per Bench: -
Aforesaid appeal by revenue for Assessment Year [AY] 2009-10 contest the order of Ld. Commissioner of Income-Tax (Appeals)-24 Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-24/IT- A.Y.2009-10 Darshak Bharat Shah 535/520/ITO-27(1)(4)/2017-18 dated 09/05/2018 qua deletion of certain additions on account of alleged bogus purchases. The grounds raised
by revenue read as under: -
1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.4,43,671/- made by the Assessing Officer on account of bogus purchases, without appreciating the fact that the assessee had failed to produce bills, vouchers and other documentary evidences in support of his 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, the Ld. CIT(A) erred in estimating the profit from Hawala Purchases by disallowing only Rs.3,47,270/- being 12.5% of the bogus purchases as even the basic onus of producing transport bills, delivery challans etc. were not fulfilled by the assessee.
None has appeared for assessee and therefore, the matter is proceeded with ex-parte qua the assessee. The assessee, vide letter dated 27/08/2019 has submitted that appeal would not be maintainable since the tax effect of quantum additions being contested by the revenue is less than monetary limit of Rs.50 Lacs as prescribed by CBDT in its latest circular No. 17/2019 dated 08/08/2019. However, the said plea stand rejected in view of the exception (e) of clause-10 as added by amended circular dated 20/08/2018 since the quantum additions were made in this case pursuant to receipt of information from Sales Tax Department, Maharashtra which is on outside agency. In the above background, we proceed to dispose-off the appeal on merits. 2.1 Facts on record would reveal that the assessee being resident individual stated to be engaged as trader in electrical /electronic goods A.Y.2009-10 Darshak Bharat Shah under proprietorship concern namely M/s Data Byte System was assessed for impugned AY u/s. 143(3) r.w.s. 147 on 24/03/2015 wherein the income of the assessee was determined at Rs.11.77 Lacs after sole addition of alleged bogus purchases for Rs.7.90 Lacs as against returned income of Rs.3.86 Lacs filed by the assessee on 19/09/2009 which was processed u/s.143(1). 2.2 Pursuant to receipt of certain information from investigation wing / Sales tax Department, Govt. of Maharashtra, it transpired that the assessee stood beneficiary of alleged bogus purchases to the tune of Rs.27.78 Lacs from 9 parties, the details of which has already been extracted at para-5.1 of the quantum assessment order. Accordingly, as per due process of law, re-assessment proceedings were initiated against the assessee u/s 147 by issuance of notice u/s 148 on 31/03/2014. In response, the assessee offered original return as filed on 29/09/2009. The statutory notices u/s 142(1) and 143(2) were issued in due course of assessment proceedings wherein the assessee was directed to substantiate the purchase transactions. 2.3 To confirm the purchases transactions, notices u/s 133(6) were issued to all parties, however the same were returned back unserved by postal authorities with the remarks “left”. The field inquiries revealed did not throw any light on the whereabouts of the suppliers. These facts were confronted to the assessee. The assessee submitted that the purchases were genuine and the payment to suppliers were through banking channels. However, the assessee failed to produce any of the suppliers. Resultantly, Ld. AO worked A.Y.2009-10 Darshak Bharat Shah out peak of purchases at Rs.7.90 Lacs and added the same to the income of the assessee. The learned first appellate authority, relying upon the decision of Hon’ble Gujarat High Court rendered in CIT V/s Simit P. Sheth [356 ITR 451] restricted the addition to 12.5% of disputed purchases which came to Rs.3.47 Lacs and deleted the balance additions. Aggrieved, the revenue is in further appeal before us. It appears that the assessee is not in further appeal. We have heard and considered the arguments raised by Ld. DR before us.
We are of the considered opinion there could be no sale without actual purchase of material keeping in view the assessee’s nature of business. The assessee was in possession of primary purchase documents and the payments to suppliers were through banking channels. The sales turnover reflected by the assessee has not been disturbed / disputed by Ld. AO. However, at the same time, notice issued u/s 133(6) to all the entities remained unserved and field inquires did not throw any light on the whereabouts of the suppliers. The assessee failed to produce even a single party to confirm the transaction and the primary onus casted upon assessee, to substantiate the purchase transactions, remained un- discharged. Under such circumstances, the additions which could be sustained, was 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 Ld. first appellate authority has rightly done. Therefore, concurring with the approach of learned first appellate authority A.Y.2009-10 Darshak Bharat Shah in restricting the additions to 12.5%, we dismiss the appeal. So far as the decision of Hon’ble Gujarat High Court rendered in N.K. Industries Ltd. Vs DCIT [72 Taxmann.com 289] is concerned, we find that the facts of that case has already been distinguished by Hon’ble Bombay High Court in Pr.CIT Vs. M/s Mohommad Haji Adam & Co. [ITA No.1004 & others of 2016, dated 11/02/2019] wherein Hon’ble Court has approved the estimation, on similar factual matrix, based on Gross Profit Rate.
In result, the appeal stands dismissed.
Order pronounced in the open court on 09th September, 2019.
Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांकDated : 09/09/2019 Sr.PS:-Jaisy Varghese आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकरआयु�(अपील) / The CIT(A) 3. आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड�फाईल / Guard File 6.