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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI PAWAN SINGH, JM
O R D E R Per Shamim Yahya, A. M.: By way of this appeal the assessee challenges the order passed by the Principal Commissioner of Income Tax-29, Mumbai (‘ld.CIT’ for short) dated 28.03.2018 and pertains to the assessment year (A.Y.) 2010-11.
The grounds of appeal read as under:
1. Ld. Pr. CIT erred in setting aside the assessment holding that order is erroneous in so far as it is prejudicial to the interest of revenue without properly appreciating the facts of the case that Ld. Assessing Officer made a disallowance of 12.5%, after due enquiries of alleged bogus purchases of Rs.14,97,817/- following certain judicial pronouncements and after considering all the material produced during the course of assessment proceedings.
2. Ld. Pr. CIT erred in not considering the facts (i) that assessment was reopened based on informations received from DGIT (Inv) Wing, Mumbai with regards to purchases under reference, such information not being based on any evidence hence reopening of the assessment was not as per law. (ii) All purchases are duly supported with bills issued by suppliers (iii) payment being made by account payee cheques (iv) the suppliers are assessed to Income Tax and are borne on PAN M/s. Washist Metals of the Income Tax department and (v) No statement recorded before sales tax authorities was provided to the appellant for cross-examination.
3. Ld. Pr. CIT erred in not appreciating that appellant is a trader and purchases are duly reconciled with the corresponding sales effected, and complete stock records are maintained.
4. Ld. Pr. CIT erred in placing reliance in para 8 on certain judicial pronouncements which does not support the conclusion that 100% of the purchases be disallowed when sales are effected out of the purchases.
5. Appellant pray that order as passed by 263 be cancelled.
Brief facts of the case are that during the year A.Y. 2010-11 relevant to F.Y. 2009- 10 the assessee had made purchase of Rs. 14,97,817/- which were held to be bogus by obtaining only bills from three parties without actual purchase of goods. During finalization of scrutiny proceedings, the Assessing Officer had not found the explanation offered by the assessee acceptable as the purchase was made through non genuine party known as tainted purchases and made an addition of Rs. 1,87,227/- (being 12.5% of bogus purchase of Rs. 14,97,817/-) by citing the decision of the Hon'ble High Court' of Gujarat in case of CIT-1 vs. SimitP. Sheth (in ITANo. 553 of 2012, order dated 16.01.2013).
In the order passed u/s. 263 of the Income Tax Act, 1961 (‘the Act' for short), the ld. CIT referred to a catena of defects in the purchase documentation. He was of the opinion that the A.O. has not properly applied his mind. The ld. CIT referred to Hon'ble Gujarat High Court decision in the case of N K Industries vs, Dy CIT (in Income Tax Appeal No. 240 of 2003, vide order dated 20.06.2016) wherein 100% disallowance on bogus purchase was done and the SLP against the said order has been dismissed by the Hon’ble Apex Court. Hence, the ld. CIT has set aside the issue to the file of the A.O.
M/s. Washist Metals stating that the same was erroneous insofar as it is prejudicial to the interest of the Revenue. The A.O. was asked to pass an order on the issue mentioned in the earlier parts of his order after giving the assessee an opportunity of being heard.
Against this order, the assessee is in appeal before us.
We have heard both the counsel and perused the records. We find that in this case the total allegation of bogus purchase was Rs.14,90,817/-. Not satisfied with the explanation of the assessee, the A.O. had made a disallowance of 12.50% of the bogus purchase. It is noted here that the A.O. has not drawn any adverse inference whatsoever on the genuineness of the sale. In the order passed u/s. 263 of the Act, the ld. CIT also did not at all make any whisper about the verification of the genuineness of the sales. He referred to the catena of the deficiency in the purchase documentation and referred to the decision of the N K Industries (supra) of the Hon’ble Gujarat High Court, wherein 100% disallowance of bogus purchase was to be done. Hence, the ld. CIT invoked his power u/s. 263 of the Act and set aside the order of the A.O. to be done afresh.
Firstly, we note that de hors any examination or adverse inference on the sales, 100% disallowance of bogus purchase is not sustainable as per the explanation of the Hon'ble jurisdictional High Court in the case of Nikunj Eximp Enterprises (in writ petition no 2860, order dt. 18.6.2014). Further for the defect in the purchase documentation, this tribunal in catena of decision has taken into account the various decisions including that from the Hon'ble jurisdictional High Court and has held that 12.50% of the bogus purchase if disallowed would serve the interest of the justice. We
M/s. Washist Metals further note that the dismissal of the SLP by the Hon’ble Apex Court does not merge the dismissal of the SLP into the order of the Hon’ble Apex Court. Accordingly, in our considered opinion, the order passed by the ld. CIT is liable to be quashed inasmuch as it is in direct contravention of the Hon'ble jurisdictional High Court decision in the case of Nikunj Eximp Enterprises (supra). Furthermore, as held by the Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. vs. CIT [2000] 243 ITR 83 (SC) if there are two views possible and the A.O. has adopted one view, with which the ld. CIT is not in agreement, the order cannot be said to be liable to be visited with the revisionary order by the ld. CIT. Accordingly, the order under 263 passed by the ld. CIT is hereby quashed.
Accordingly, we decide the issue in favour of the assessee.
In the result, the assessee’s appeal is allowed.