Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEYAND SHRI N.K. PRADHAN
Date of Hearing – 08.08.2019 Date of Order – 30.08.2019
O R D E R PER BENCH
These are two sets of cross appeals arising out of two separate orders, both dated 21st April 2015, passed by the learned
2 Shri Suresh Maneklal Sheth Commissioner of Income Tax (Appeals)–37, Mumbai, pertaining to the assessment years 2008–09 and 2009–10.
Since all these appeals pertain to the same assessee involving common issues arising out of identical set of facts and circumstances, therefore, as a matter of convenience, these appeals were heard together and are being disposed off by way of this consolidated order.
Brief facts are, the assessee, an individual, is carrying on business of trading in paper through his proprietorship concern Namrata Paper Agencies. For the assessment year under dispute, the assessee had filed his return of income in regular course declaring income of ` 8,41,990, and ` 6,72,160, for the assessment years 2008– 09 and 2009–10 respectively. On the basis of information received from the Sales Tax Department, Government of Maharashtra and the DGIT (Inv.), Mumbai, that certain purchases shown by the assessee in these years are not genuine as they are mere accommodation entries through bogus purchase bills, the Assessing Officer re–opened the assessment under section 147 of the Income Tax Act, 1961 (for short "the Act"). In course of assessment proceedings, the Assessing Officer called upon the assessee to prove the genuineness of purchases made of ` 75,82,917, in the assessment year 2008–09 and ` 85,97,910, in the assessment year 2009–10. As observed by the Assessing Officer, except furnishing the purchase bills, bank account copy, etc., the 3 Shri Suresh Maneklal Sheth assessee could not furnish any supporting evidences to prove actual delivery of goods and further, since, the notices issued under section 133(6) of the Act, returned back unserved by the postal authority, the Assessing Officer held that the purchases claimed to have been made are mere accommodation entries and accordingly disallowed them. Having done so, the Assessing Officer added back the entire non– genuine purchases to the income of the assessee in both the assessment years. The addition made in different assessment years are as under:– A.Y. 2008–09 ` 75,82,917 A.Y. 2009–10 ` 85,97,910
Being aggrieved with the aforesaid additions, assessee preferred appeals before the first appellate authority.
After considering the submissions of the assessee in the light of certain judicial precedents, learned Commissioner (Appeals) observed that the Assessing Officer has not disputed the sales effected by the assessee. Further, he observed, there is no dispute that the assessee has made payment through cheques and there is nothing on record to show that the assessee has received back the amount in cash from the suppliers. Thus, applying the ratio laid down by the Hon'ble Jurisdictional High Court in Nikunj Eximp Enterprises v/s CIT, and the decision of Hon’ble Gujarat High Court in CIT v/s Simit P. Sheth, 356
4 Shri Suresh Maneklal Sheth ITR 451 (Guj.), learned Commissioner (Appeals) ultimately restricted the addition to 12.5% of non–genuine purchases in both the years. Being aggrieved with the aforesaid decision of learned Commissioner (Appeals), both the parties are in appeal before us.
The learned Authorised Representative reiterating the stand taken before the Departmental Authorities submitted, since the purchases made by the assessee are genuine, no addition should be made. Without prejudice, the learned Authorised Representative submitted, estimation of profit @ 12.5% by learned Commissioner (Appeals) is high and excessive considering the profit margin in paper business. He submitted, assessee has shown gross profit of 8.34% in assessment year 2008–09 and 4.54% in the assessment year 2009– 10. He submitted, let the addition be restricted to the difference between the rate of profit estimated by learned Commissioner (Appeals) and gross profit margin shown by the assessee.
The learned Departmental Representative strongly relying upon the observations of the Assessing Officer submitted, since the assessee has failed to prove the genuineness of purchases and it is proved that the assessee has availed accommodation entries from hawala operators, the Assessing Officer was justified in adding the entire non–genuine purchases. He submitted, learned Commissioner (Appeals) has committed error in restricting the addition to 12.5%.
5 Shri Suresh Maneklal Sheth
We have considered rival submissions and perused the material on record. At the outset, we propose to address the grounds raised
by the assessee challenging the validity of re–opening of assessment under section 147 of the Act. On a perusal of the material on record, it is evident that after completion of the original assessment, the Assessing Officer received information from the percentage of DGIT (Inv.), Mumbai, as well as Sales Tax Department, Government of Maharashtra, indicating that the assessee is a beneficiary of accommodation entries provided by certain hawala operators by way of bogus purchase bills. On the basis of such information available on record, the Assessing Officer has re–opened the assessments under section 147 of the Act. Thus, it is evident, on the basis of tangible material available on record, the Assessing Officer has formed belief that income chargeable to tax has escaped assessment requiring re– opening of assessment under section 147 of the Act. In view of the aforesaid, we hold that re–opening of assessment under section 147 of the Act in the facts of the present case are valid.
9. Having held so, now we propose to deal with the merits of the additions made by the Assessing Officer and partly sustained by learned Commissioner (Appeals). As could be seen from the facts on record, in course of assessment proceedings the assessee had failed to prove the genuineness of purchases from the declared source by 6 Shri Suresh Maneklal Sheth furnishing any cogent evidence to show actual delivery of goods. Further, notices issued under section 133(6) of the Act by the Assessing Officer to verify the genuineness of purchases also returned back un–served, hence, the identity of the selling dealers could not be established. However, it is a fact on record that sales effected by the assessee have not been disputed by the Assessing Officer. That being the case, it has to be concluded that in absence of purchases, the assessee could not have effected corresponding sales. Thus, dispute remains only with regard to the source from which the assessee purchased the goods. In the aforesaid factual position, the addition of the entire purchase is not justified. Therefore, to that extent, learned Commissioner (Appeals) was correct in estimating the profit on the non–genuine purchases for the purpose of addition.
Now reverting back to the reasonableness of estimating profit @ 12.5%, after over all consideration of facts and material on record, the nature of business carried on by the assessee as well as the gross profit margin earned, we are of the view that estimation of profit @ 6% of the non–genuine purchases would be reasonable. Accordingly, we direct the Assessing Officer to restrict the addition in both the assessment years under appeal to 6% of the non–genuine purchases. Grounds raised by the Revenue are dismissed and grounds raised by the assessee are partly allowed.
7 Shri Suresh Maneklal Sheth
In the result, Revenue’s appeals are dismissed and assessee’s appeals are partly allowed. Order pronounced in the open Court on 30.08.2019