RAJU KISHINCHAND MAHTANI,MUMBAI vs. ERSTWHILE ACIT 19(3), PRESENTLY ACIT 23(3), MUMBAI

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ITA 284/MUM/2018Status: DisposedITAT Mumbai22 March 2019AY 2009-104 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that while bogus purchases were established, the rate of 25% applied by the lower authorities was excessive. Considering the assessee's business and profit margins, a rate ranging from 3% to 12.5% was deemed reasonable by coordinate benches.

What were the facts?

The assessee, engaged in gold and diamond ornaments business, was found to have taken bogus purchase bills without receiving goods. The Assessing Officer (AO) made an addition of 25% of the alleged bogus purchases, which was upheld by the CIT(A) but with an enhanced amount of bogus purchases.

What were the issues?

The primary issue was the rate at which to tax the profit on bogus purchases. The Tribunal also considered the enhancement of the bogus purchase amount by the CIT(A).

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 133(6),Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI

Before: SHRI RAJESH KUMAR & SHRI RAM LAL NEGI

For Appellant: Shri Vinay Sinha, A.R
For Respondent: Shri D.G. Pansari, D.R
Hearing: 21.02.2019Pronounced: 22.03.2019

Per Rajesh Kumar, Accountant Member:

1.

The above titled three appeals have been preferred by the assessee against the common order dated 24.10.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment years 2009-10, 2010-11 & 2011-12.

2.

The only issue raised by the assessee in all the three appeals is against the order of Ld. CIT(A) confirming the addition @ 25% of the alleged bogus purchases as made by the AO. In Rs.4,67,188/- which has happened due to the fact that amount

3.

The is taken up first. The facts in brief that the assessee is engaged in the business of manufacturing and trading of gold and diamond ornaments. The assessee has filed the income tax return 30.9.2009 declaring an income of Rs.97,27,410/- which was processed u/s 143(1) of the Act. Thereafter the case was re-opened u/s 147 of the Act by issuing notice u/s 148 of the Act dated 18.3.2014 after the AO received information from sales tax deptt. Govt. of Maharashtra that assessee has taken bogus bills without taking actual delivery of goods to the tune of Rs. 53,86,277/- from two parties. During the course of assessment proceedings the AO called for necessary details which were filed by the assessee. The assessee filed before the AO copies of bills, delivery slips, extracts of stock register and copies of bank statements etc. The AO also issued notice u/s 133(6) of the Act to one of the party named Larchan Trading Co. which was returned unserved. The AO thereafter made addition to the tune of 25% of the bogus purchases to the income of the assessee by framing assessment u/s 143(3) r.w.s. 147 of the Act vide order dated 26.9.2014 however the amount of bogus purchases was taken at Rs. 35,17,524/-instead of Rs. 53,86,277/-.

4.

In the appellate proceedings the ld CIT(A) upheld the addition at 25% of the bogus purchases but the bogus purchases were taken at Rs. 53,86,277/- which was the correct amount.

3 285 & 286/M/2018 M/s. Raju Kishinchand Mahtani 5. After hearing both the parties and perusing the materials on records, we observe the assessee is undisputably taken bogus purchase bills from two parties. The AO brought to tax the bogus purchases @ 25% of the bogus purchases which was confirmed by the ld CIT(A).In this case the AO has not disputed the sales of the assessee meaning thereby that the assessee has made the purchases from grey markets thereby making savings of VAT and other incidental expenses. So we are concerned with only at what rate the bogus purchases should be taxed. The assessee is a manufacturer and traders of gold and diamond ornaments and has declared a very good GP and NP in the books of accounts. So under these circumstances, we are not in agreement with the ld CIT(A) on the rate which is to be applied to tax the profit on bogus purchases. Under similar facts the coordinate benches have taken view that addition may be made at rate ranging from 3% to 12.5%. In the instant case we deem it reasonable to direct the AO to apply 8% to the bogus purchases. Accordingly, the appeal of the assessee is partly allowed.

& 286/Mum/2018 6. The issue raised in these appeals is identical to one as decided by us in AO to apply the rate of 8% on the bogus purchases. Accordingly, following the same we direct the AO to apply same rate in these appeals as well. The appeals of the assessee are partly allowed.

Order pronounced in the open court on 22.03.2019.

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