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Income Tax Appellate Tribunal, MUMBAI BENCHES “SMC”, MUMBAI
Before: Shri Shamim Yahya & Shri Ravish Sood & ITA No.3604 & 3605/Mum/2018
"नधा"रती क" ओर से / Assessee by Shri D. B. Sanghvi Shri Chaitnya Anjaria राज"व क" ओर से / Revenue by सुनवाई क" तार"ख / Date of Hearing : 22/04/2019 23/04/2019 आदेश क" तार"ख /Date of Order: आदेश / O R D E R Per Shamim Yahya (Accountant Member) These appeals by the assessee are directed against order of the Ld. CIT(A)-42, Mumbai, dated 02/02/2018 and pertains to Assessment Years 2009-10 and 2010-11, on the ground that the Ld. CIT has erred in sustaining 12.5% disallowance on account of bogus purchases of Rs.14,09,620 for AY 2009-10 and Rs.7,58,190/- for AY 2010-11. & 3605/Mum/2018, 2
The Assessing Officer in this case has made 12.5% addition on account of bogus purchase. Upon assesses appeal, the Ld. CIT(A) confirmed the same.
The brief findings of the AO on facts are as under:-
The assessment was reopened upon information from DGIT regarding assessee engaging in bogus purchases. The AO observed that on going through the details filed during the course of assessment proceedings and no verification of the Tin of this parties, it was also found/noticed that the above mentioned purchase parties were appearing in the lists of the suspicious dealers who indulge in issuing bogus bills without any goods or material but for a commission, as per the official website of the Sales Tax Department, Government of Maharashtra. www.mahavat.gov.in. Considering this fact and the parties reflecting as suspicious dealers published by the Sales Tax Department, the assessee was given an opportunity to explain why purchases from the above parties should not be added to the total income as unexplained expenditure u/s 69C of the I.T. Act, 1961. The assessee did not submit anything specific in this regard. Assessee has submitted bank statements, party wise purchase invoices, ledgers & delivery challans. However, assessee has not furnished any supporting evidences like specific transaction details, identity proof, L/R or Octroi receipts etc.
Against above order assessee is in appeal before the ITAT. We have heard both the counsel and perused the records. Up on careful consideration, we find that assessee has provided the documentary evidence for the purchase.
Adverse inferences have been drawn due to the inability of the assessee to produce the suppliers. We find that in this case the sales have not been doubted. It is settled law that when sales are not doubted, hundred percent disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from honourable jurisdictional High Court decision in the case of Nikunj eximp enterprises (in writ petition no 2860, order dt 18.6.2014). In this case the honourable High Court has upheld hundred percent allowance for the purchases said to be bogus when sales are not doubted. However in that case all the supplies were to government agency.
In this regard we also note the decision of honourable Gujarat High Court in the case of Pr CIT vs T R Kapadia in & 3605/Mum/2018, 4 Tax Appeal no 691 of 2017. In this case the honourable High Court has confirmed the deletion of disallowance on account of alleged bogus purchase as necessary documentary evidence for the purchase were on record. The special leave petition against this order has been dismissed by the honourable Supreme Court in its decision dated 04/05/2018 SLP CIVIL Diary no 12670/2018.
In the present case the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In such situation in our considered opinion on the facts and circumstances of the case the 12.5% disallowance out of the bogus purchases meets the end of justice. However in this regard learned counsel of the assessee has prayed that when only the profits earned by the assessee on these bogus purchase transaction 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. Up on careful consideration, we find considerable cogency in the ITA No.3604 & 3605/Mum/2018, 5 submission of the learned counsel of the assessee, as otherwise it will be double jeopardy to the assessee.
Accordingly, we modify the order of learned 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. Ld counsel of the assessee fairly accepted this proposition.
Another proposition canvassed by the learned counsel of the assessee is that for assessment year 2009-10, there is no purchase from Universal trading, which figure has been taken as Rs.15.99 lakhs. This, the learned counsel pleaded is arising from the remand report obtained by the learned Commissioner of income tax from the assessing office. Hence learned counsel pleaded that no disallowance should be made on account of these purchases listed as bogus purchases.
Up on careful consideration we deem it appropriate to remit this issue also to the files of the Assessing Officer. The assessing officer shall make the factual verification of the assessee submission and thereafter decide as per law.
One ground raised by the assessee relates to interest under section 234B of the Act. On this issue learned counsel of the assessee has placed reliance upon following case laws: i. Vijay Kumar Saboo vs ACIT (340 ITR 382)(Karnataka) ii. CIT vs B. Lakshmikanthan (2011)(198 taxman 485)(Kerala)
For the proposition that interest u/s 234B is not calculated in accordance with the extant provision of section 234B(1) and 234B(3) of the Act.
Up on careful consideration we are of the opinion that interest under section 234B is consequential in nature as held by the learned CIT(A). The submission of the assessee’s counsel and the case laws referred may be considered by the assessing officer in making the levy of interest in this regard.
In the result, these appeals filed by the assessee are partly allowed.
Order pronounced in the Open Court on 23/04/2019 (Ravish Sood) (Shamim Yahya) "या"यक सद"य / JUDICIAL MEMBER लेखा सद"य / ACCOUNTANT MEMBER मुंबई Mumbai; "दनांक Dated : 23/04/2019 f{x~{tÜ? P.S/."न.स.