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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Aayakr ApIla saM./ (inaQa-arNa baYa- / Assessment Year 2009-10) Aayakr ApIla saM./ (inaQa-arNa baYa- / Assessment Year 2010-11) Fazal Haque Mohammed The Income Tax Officer, Yunus Khan Ward 27(1)(4), Mumbai Plot No. 33-A, L04 Vs. Baiganwadi, Road, No. 12, Shivaji Nagar, Govandi, Mumbai-400 043 .. (ApIlaaqaI- / Appellant) (p`%yaqaaI- / Respondent) स्थायी लेखा सं./PAN No. AGZPK6621L अपीलाथी की ओर से / Appellant by : Shri S.D. Avhad, AR प्रत्यथी की ओर से / Respondent by : Shri Manish Kumar Singh, DR सुनवाई की तारीख / Date of hearing: 22.03.2019 घोषणा की तारीख / Date of pronouncement : 22.03.2019 AadoSa / O R D E R महावीर ससंह, न्याययक सदस्य/ PER MAHAVIR SINGH, JM: At the outset, it is to be mentioned here that when these stay petitions were called for hearing, the learned Counsel for the assessee ITAs No. 117 & 118/Mum/2019 & SAs No. 70 & 75/Mum/2019 stated that the only issue arising out of the appeals filed by the assessee is estimation of bogus purchases. He narrated that the assessing officer has added the entire alleged bogus purchases in both the years and CIT(A) confirmed the action of the AO. He further narrated that the entire stock tally is maintained and neither the AO nor CIT(A) has doubted the consumption/ sales carried out in both the years, hence, only profit element is to be added. Hence, he offered that at the best the profit declared by the assessee @ 15% can be estimated for the purpose of making addition on account of bogus purchases. Hence, he tried to make out a prima facie case. When this was put across to both the parties i.e. the learned Sr. DR, Shri Manish Kumar Singh and also the learned Counsel for the assessee Shri S.D. Avhad, both offered that even the appeal can be disposed off by estimating the profit rate @ 15% as offered by the learned Counsel for the assessee. Hence, we take up these appeals for adjudication at the time of hearing itself today i.e. 22.03.2019
These appeals filed by the assessee are arising out of the different orders of Commissioner of Income Tax (Appeals)-24, Mumbai [in short CIT(A)], Appeal No. CIT(A)-25/IT-22/ITO 2&(1)(4)/2016-17 & CIT(A)- 24/ITO-27(1)(4)/IT-545/2017-18 & CIT(A)-24/IT-21/ITO27(10(4)/2016-17 dated 27.09.2018 & 08.10.2010. The Assessments were framed by the Income Tax Officer, Ward-27(1)-4, Mumbai (in short ‘ITO/ AO’) for the A.Ys. 2009-10 & 2010-11 vide even dated 20/-1/2-16 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The first issue in this appeal of assessee is against the order of CIT(A) confirming the addition made by AO on bogus purchase. For this assessee has raised identically worded grounds in both the years except the quantum. The facts and circumstances are exactly identical in both the years and hence, we will take the facts from AY 2009-10 and will decide the issue.
ITAs No. 117 & 118/Mum/2019 & SAs No. 70 & 75/Mum/2019
Briefly stated facts are that the assessee engaged in the business of fabrication work with metal sheets. 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. 6,79,383/- for AY 2009-10 & ₹ 8,84,278 for AY 2010-11 as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: - 2009-10 Name of party Amount Siddhivinayak Steel 2,08,120 Asian Steel 1,74,467 Shiv Industries 68,765 Garima Steel Traders 2,28,031 Total 6,79,383 2010-11 Name of party Amount Siddhivinayak Steel 3,74,270 Shriti Enterprises 156,374 Asian Steel 1,56,854 Garima Steel Traders 1,55,854 Total 8,43,278 5. 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 and also the details of consumption. But, according to the AO, the assessee failed to establish the genuineness of the purchase and accordingly, he made addition of entire unproved purchases at ₹ 6,79,383/- for AY 2009-10 & ₹ 8,43,278/- for AY 2010-11 to the returned income of the assessee. Aggrieved, assessee preferred ITAs No. 117 & 118/Mum/2019 & SAs No. 70 & 75/Mum/2019 the appeal before CIT(A), who confirmed the addition made by the AO by observing in para 5.2.13 to 5.2.17 (for AY 2009-10) by observing as under: - “5.2.13 On careful examination of the above, it is seen that the facts of the said case are distinguishable. In the said case, the assessee had furnished letters of confirmation from the suppliers apart from copies of invoices, bank statements evidencing payments made to the suppliers through cheques and stock reconciliation etc. Further, the sales made by the assessee in the said case were not doubted in the background of the fact that substantial amount of sales were made to Government departments. In the context of the said factual background, the Hon’ble High Court held that it is wrong to conclude that purchases were not made by the assessee merely because the suppliers had not appeared before the A.O. It is important to note that in the said case, the confirmations from the suppliers were furnished by the assessee to the A.O and sales made by the assessee were not doubted.
However, as already pointed out. the appellant in the present case has failed to furnish the letters of confirmation from the suppliers regarding the actual supply of the material by them to the appellant. Moreover, as mentioned earlier, the fact that sales have not been doubted by the AO ITAs No. 117 & 118/Mum/2019 & SAs No. 70 & 75/Mum/2019 in the present case does not help the case of the assessee in any manner as the appellant is not a trader. Hence, the case cited by the appellant is distinguishable on the facts and the same cannot he considered to be applicable to the facts of the appellant's case.
5.2.14 The AR has also relied on the decision of Hon'ble ITAT Mumbai Bench in the case of Rajeev G. Kalathil in and CO No. 06/Mum/2014 where vide order dated 20.08.2014, the addition made on account of bogus purchases were deleted. However, I find that the finding of the Hon’ble ITAT is based on the peculiar facts of the case as in that case, goods received by the assessee, from the supplier was admitted to have been transported by the transporter. However, in the present case, no such proof of delivery through a particular lorry number has been provided as far as the appellant's purchase is concerned. Thus, the decision rendered in the case of Rajeev G Kalathil (supra) cannot be said to be applicable in this case.
5.2.15 The appellant has relied on few other decisions. However, in the light of the deficiencies in the case of the appellant, various decisions relied upon by the appellant are not applicable as they are clearly distinguishable on facts.
ITAs No. 117 & 118/Mum/2019 & SAs No. 70 & 75/Mum/2019 5.2.16 Having regard to the aforesaid discussion, the facts and circumstances of the case and the material available on record, I am of the considered opinion that the appellant has failed to discharge its burden of proving the genuineness of the impugned purchases of Rs 6,79,383/- with evidences. Consequently. it is held that the said purchases are unsubstantiated and have to be considered as bogus purchases which have been debited in the books of account without the actual receipt.
5.2.17 In the light of the foregoing discussion, the disallowance of ₹ 6,79,383/- towards unexplained purchase is confirmed.”
We have considered the issue and gone through the facts and circumstances of the case. We find from the facts of the case and argument of both the sides, that the CIT(A) has confirmed the action of the AO in making addition of the entire bogus purchase, which according to us is unreasonable on the given facts and circumstances that the claim of assessee is not negated by the lower authorities that the purchases were made from regular parties supported by bills and vouchers, the same was entered into accounting entries in the books of accounts, consumption details were filed and payments were made by account payee cheques. The assessee is normally disclosing the profit rate @ 15% as informed by the learned Counsel for the assessee before us. We have also noted that the assessee has also submitted the consumption ratio vis-à-vis purchases month wise. Accordingly, we are in full agreement with the argument of the learned Counsel for the assessee and according to us a profit rate of 15% will meet the end of justice in ITAs No. 117 & 118/Mum/2019 & SAs No. 70 & 75/Mum/2019 view of the decision of Hon’ble Gujarat High Court in the case of CIT vs. Smith P. Seth (2013) 356 ITR 451 (Guj). Hence, we direct the AO to recompute the income after applying profit rate at the rate of 15% of the bogus purchases and compute the income accordingly. The appeal of the assessee is partly allowed.
Similar are the facts in AY 2010-11 and hence, we direct the AO to apply profit rate at the rate of 15% on the bogus purchases.
The second common issue in these appeals of assessee is as regards to the orders of CIT(A) confirming the disallowance of expenses on adhoc basis amounting to ₹ 2 lacs on account of inadmissible evidence in each of the year. For this assessee has raised identically worded grounds in both years. As the facts and circumstances are exactly identical in both the assessment years, hence, we will take the ground for AY 2009-10 as under: - “b. Disallowance of business expenses of an adhoc amount of ₹ 2,00,000/- on account of inadmissible evidence.”
We have heard rival contentions and gone through the facts and circumstances of the case. We find that the assessee could not file any evidence before the AO in regard to claim of these business expenses inspite of sufficient opportunities provided and accordingly, the AO made disallowance. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) also confirmed the disallowance of expenses.