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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai
Before: Shri Shamim Yahya (AM) & Shri Ravish Sood (JM)
O R D E R Per Shamim Yahya (AM) : These are appeals by the assessee wherein the assessee is aggrieved that learned CIT(A) has erred in sustaining 100% disallowance on account of bogus purchases as under :- A.Y. Amount (Rs.) 2009-10 1,69,784 2010-11 11,33,600 2011-12 23,89,800
The Assessing Officer in these cases has made 100% addition on account of bogus purchases. Upon assessee’s appeal learned CIT(A) confirmed the same. Against the above order the assessee is in appeal before the ITAT.
We have heard both the counsel and perused the records. In support of his case learned Counsel of the assessee has placed reliance upon the decision
2 Mr. Amarlal Dharmdas Kewalramani of Hon'ble Bombay High Court in the case of PCIT Vs. Mohommad Haji Adam (Income Tax Appeal No. 1004 of 2016 vide Judgement dated 23.4.2019).
Upon 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, 100% disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases.
We note that in the case of Mohommad Haji Adam (supra) Hon'ble Bombay High Court has held as under :- 8 In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sales declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. Industries (supra) cannot be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under:-
“So far as the question regarding addition of Rs.3,70,78,125/- as gross profit on sales of Rs.37.08 crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6% gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66%. Therefore, considering
3 Mr. Amarlal Dharmdas Kewalramani
5.66% of Rs.3,70,78,125/- which comes to Rs.20,98,621.88 we think it fit to direct the revenue to add Rs.20,98,621.88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue.”
9 In these circumstances, no question of law, therefore, arises. All Income Tax Appeals are dismissed, accordingly. No order as to costs.
Respectfully following the precedent, we direct that addition in this regard should be restricted to gross profit which is around 8%. The learned Counsel of the assessee fairly agreed to the same.
In the result, assessee’s appeals are partly allowed.
Order has been pronounced in the Court on 3.5.2019.