NAGINBHAI KHIMJI CHOUDHARY HUF,MUMBAI vs. INCOME TAX OFFICER 19(2)(4), MUMBAI

PDF · subscribers
ITA 4790/MUM/2018Status: DisposedITAT Mumbai30 August 2019AY 2011-126 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that since sales were not doubted, a 100% disallowance was not justified. It further held that taxing the gross profit already declared would lead to double jeopardy.

What were the facts?

The assessee was found to have made bogus purchases from certain parties. The Assessing Officer (AO) made an addition of 12.5% of these bogus purchases, which was upheld by the CIT(A). The assessee argued that only the profit on these transactions should be taxed.

What were the issues?

Whether the disallowance on account of bogus purchases should be restricted to the profit element, considering the gross profit already offered by the assessee.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(1),Section 143(2),Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH,

Before: SHRI SHAMIM YAHYA, AM & SHRI AMARJIT SINGH, JM

For Appellant: Shri Manoj Pandit
For Respondent: Shri Chaitanya Anjaria (DR)
Hearing: 28/08/2019Pronounced: 30/08/2019

Heard together (3 matters)

I.T.A. No. 4790/Mum/2018
I.T.A. No. 4791/Mum/2018
I.T.A. No. 4792/Mum/2018

Read from the judgment's own cause title. This page is filed under one of them.

to 4792/M/2018 A.Y.2011-12, 2010-11 & 2009-10 आदेश / O R D E R

PER AMARJIT SINGH, JM:

1.

The assessee has filed the above mentioned appeals against the different order passed by the Commissioner of Income Tax (Appeals) -29, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Ys.2009-10, 2010-11 & 2011-12.

ITA. NO. 4792/M/2018

2.

The assessee has filed the present appeal against the order dated 01.06.2018 passed by the Commissioner of Income Tax (Appeals) -29, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009- 10.

3.

The assessee has raised the following grounds: - “

1. The Ld. CIT(A) erred in dismissing your appellants appeal & upholding AO order. The Ld. CIT(A) ought to have given credit for regular G.P. of your appellant in income tax return filed. The total G.P. taken comes to 18.75%. Which is very high and unreasonable. Your appellant prays to take reasonable G.P.

2. Your appellant keeps the right to add, amend or alter any of the above grounds on or before hearing.”

3. The brief facts of the case are that the assessee filed his return of income on 27.09.2009 declaring total income to the tune of Rs.1,88,820/-. The return was processed u/s 143(1) of the I.T. Act, 1961. The case of the assessee was reopened u/s 147 of the Act. In reply to the notice, the assessee has filed the return of income which he had filed earlier. Thereafter, notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The assessee was engaged in the business of trading in Ferrous and Non-Ferrous Metals under the name & style of proprietorship to 4792/M/2018 A.Y.2011-12, 2010-11 & 2009-10 concern M/s. Metal Udyog. An information received from the DGIT (Inv.) Wing, Mumbai in which it was conveyed that the assessee has taken the accommodation entries of bogus purchase in sum of Rs.48,06,956/- from the following four parties.

Name of the Party F.Y. Amount Shriji Trading Co. 2008-09 4,77,316/- Vitrag Trading Co. 2008-09 8,02,519 Monal Metal Alloys 2008-09 5,09,027 Sunshine Metal Industries 2008-09 30,18,094 Total 48,06,956 4. After the reply of the assessee, the AO raised the addition to the extent of 12.5% of the bogus purchase. The total income of the assessee was assessed to the tune of Rs.7,89,690/- /-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who confirmed the addition to the extent of 12.5%, therefore, the assessee has filed the present appeal before us.

5.

We have heard the argument advanced by the Ld. Representative of the parties and perused the record. The assessee failed to produce the sufficient evidence before the AO to prove the purchase as genuineness. The assessee also failed to produce the suppliers before the AO also. In the instant case, sale is not doubted. It is settled law that when the sales are not doubted then the 100% disallowance addition cannot be made and in this regard we also find support in law settled by the Hon’ble Jurisdictional High Court in the case of Nikunj Eximp Enterprises (in writ petition no.2860 dated 18.06.2014). In the present case the facts of the case following that the assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on to 4792/M/2018 A.Y.2011-12, 2010-11 & 2009-10 account of non-payment of tax of and others at the expenses of the exchequer. In view of the said circumstances, no harms seem if the restriction of the bogus purchase be confirmed to the extent of 12.5% of the bogus purchase. The Ld. Representative of the assessee has argued that when only the profit earned by assessee on these bogus transactions is to be taxed the gross profit already shown by the assessee and offered to tax should be reduced from the standard 12.5% being directed to be disallowed on account of bogus purchase.

6.

Up on careful consideration, we find strength in the submission of the Ld. Representative of the assessee as otherwise it will be double jeopardy to the assessee. Accordingly, we modify the order of the Ld. CIT(A) and direct that the disallowance in this case be restricted to 12.5% of the bogus purchases as reduced by the gross profit rate already declared by the assessee on these transactions. Accordingly, we set aside the finding of the CIT(A) and allowed the claim of the assessee.

ITA. Nos. 4790/M/2018 & 4791/M/2018 7. The facts of the present case are quite similar to the fact of the case as narrated above while deciding the therefore, there is no need to repeat the same. However, the figure is different. The matter of controversy is also the same. The finding given above while deciding the appeal of the assessee bearing ITA. No.4792/M/2018 is quite applicable to the facts of the present case as mutatis mutandis.

More judgments on Section 147

All 49,210 judgments and leading authorities on Section 147 →

Recent GST High Court judgments

Search GST case law →