VIRAL SANJIV SHAH,MUMBAI vs. ACIT 22(2), MUMBAI

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ITA 3610/MUM/2018Status: DisposedITAT Mumbai21 August 2019AY 2010-114 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that while the genuineness of purchases was doubtful, the assessee had made sales and incurred expenses. Therefore, a reasonable profit could be estimated on the bogus purchases.

What were the facts?

The assessee purchased goods from hawala parties who provided bogus bills. The Assessing Officer (AO) estimated profit at 25% of these purchases, which was confirmed by the CIT(A). The assessee provided documentary evidence for purchases and sales but lacked transportation evidence.

What were the issues?

Whether the AO was justified in estimating profit on bogus purchases, and if so, at what rate.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SRI MAHAVIR SINGH

For Appellant: Shri Vimal Punamiya, AR
Hearing: 13.08.2019Pronounced: 21.08.2019

महावीर स ुंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:

This appeal of the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-34, Mumbai [in short CIT(A)], in Appeal No CIT(A)-34/ACIT-22(2)/IT-4/5/2015-16 vide order dated 12.02.2018. The Assessment was framed by the Asst. Commissioner of Income Tax, Circle 22(2) Mumbai (in short ‘ACIT/ITO/ AO’) for the A.Y.

2 2010-11 vide order dated 20.02.2015 under section 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).

2.

The only issue on merits, in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in estimating the profit at the rate of 25% of the bogus purchases.

3.

Briefly stated facts are that the assessee is earning income from business and from other sources. The AO received information from DGIT (Investigation), who in turn received information from Sales Tax Department, Mumbai that the assessee has made purchases from hawala parties, as listed in hawala dealers by the Maharashtra Sales Tax Department who are providing bogus bills of purchase amounting to Rs.5,25,488/- as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: -

Name Amount Gopikrishna Trading Co/ 5,25,488 Blue Sky Trade Impex Total 5,25,488

4.

During the course of assessment proceedings and during appellate proceedings, the assessee submitted documentary evidences such as payment received against such sales, receipt of material purchases, account payee cheque. According to the AO, the assessee failed to establish the genuineness of the purchase and accordingly, he made addition of unproved purchase at 25% of ₹ 1,31,372/- to the returned income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who confirmed the action of the AO by observing in para 6 as under:

“6. AY 2010-11

3

6.

1 The facts and circumstances of this case is absolutely identical to that of AY 2010-11 except that the bills for bogus purchases in this year is as under:

Sr. Name of the party Amount No. 1 Gopikrishna Trading 5,25,488 Co/ Blue Sky Trade Impex Total 5,25,488

6.

2 On the basis of arguments, discussion and reliance of case laws, I hold that the AO has rightly applied the ratio of the decision in the case of M/s Vijay Proteins Ltd.(1996 58 ITD 428 Ahd.). Thus, disallowance of ₹ 1,31,372/- being 25% of purchases from such suspicious declared made by the AO, is upheld and this ground is dismissed.”

Aggrieved, assessee came in appeal before Tribunal.

5.

I have heard the rival contentions and gone through the facts and circumstances of the case. I noted that neither the AO nor CIT(A) has doubted the sales made by assessee out of these bogus purchase. Further, the assessee has produced all the necessary documents in support of purchased transactions such as purchase invoices, purchase register, sales register, stock register, bank statement evidencing payment made by account payee cheque etc. But it is a fact that the assessee could not produce the transportation evidences or expenditure incurred on account of transportation in regard to these purchases. Hence, I am of the view that a reasonable profit can be estimated

4 because the estimation of profit is on higher site. The assessee is engaged in the business of works contractor and interior decorators since 2006 the assessee had obtained bogus bills to inflate the expenses in execution of its contracts. But it is also not denied that the assessee has not carried out the execution of contract and has not made purchases. Hence, a reasonable profit on these bogus bills can be estimated. Hence, I estimate the profit on these bogus bills at the rate of 5% and direct the AO to recompute the income accordingly.

6.

In the result, the appeal of assessee is partly allowed. Order pronounced in the open court on 21-08-2019. (महावीर ससंह /MAHAVIR SINGH) (न्याययक सदस्य/ JUDICIAL MEMBER) मुंबई, ददनांक/ Mumbai, Dated: 21-08-2019 दीप रकार, व.यिजी धिव / Sudip Sarkar, Sr.PS आदेश की प्रयिसलपप अग्रेपिि/Copy of the Order forwarded to : अपीलाथी / The Appellant 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त(अपील) / The CIT(A) 3. आयकर आयुक्त / CIT 4. 5. ववभागीय प्रयतयनधि, आयकर अपीलीय अधिकरण, मुंबई / DR, ITAT, Mumbai गार्ड फाईल / Guard file. 6. आदेशाि ार/ BY ORDER, सत्यावपत प्रयत //// उप/ हायक पुंजीकार (Asstt.

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