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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI JOGINDER SINGH & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 04.09.2015 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11.
The grounds raised by the assessee are as under: “1) The learned authorities below erred in law and on facts in re-opening the assessment without any basis and ground and without considering all the material facts and circumstances of the case.
2) The learned authorities below erred in law and on facts in making an addition of Rs. 99,94,191/- in respect of certain purchases in computing the total income under normal provisions of the Act without any basis and ground and without considering all the material facts and circumstances of the case. 3) The learned authorities below erred in law and on facts in not allowing set
2 M/s. Birla Cotsyn (India) Ltd. off of brought forward depreciation loss of earlier years without appreciating and considering all the material facts and circumstances of the case.
4) The learned authorities below erred in law and on facts in not allowing carry forward of MAT credit of earlier years and for the year under consideration without appreciating and considering all the material facts and circumstances of the case.
5) The learned authorities below erred in initiating penalty proceedings u/s 271(1)(c) without appreciating and considering all the material facts and circumstances of the case.
6) The appellant craves leave to add, alter, amend or delete any ground or grounds of appeal on or before the date of hearing.”
The issue raised in first ground of appeal is against the reopening of assessment of the assessee without any basis and without any tangible material. The facts in brief are that the assessee filed return of income on 29.09.2009 declaring a loss of Rs.68,84,343/- under the normal provision of the Act and Rs.11,57,13,984/- under section 115JB of the Act. Thereafter, the return was revised on 08.03.2011 declaring the same loss under the normal provision and income under section 115JB of the Act. Thereafter, the case of the assessee was selected for scrutiny and assessment was framed under section 143(3) of the Act on 29.01.2013 accepting the loss under the normal provision and income under section 115JB of the Act. The assessee was into the business of manufacturing of cotton and synthetic yarn, wool yarn, jute yarn, ginning & pressing of cotton, manufacturing and trading of oil seed cotton cake. The case of the assessee was reopened after AO received information from DGIT (Investigation) who in turn was supplied information as to hawala racket by the Sales Tax Department, Government of Maharashtra that assessee has 3 M/s. Birla Cotsyn (India) Ltd. taken accommodation entries from M/s. Siddhapad Trading Pvt. Ltd. amounting to Rs.99,94,191/- . Thus the assessee inflated the expenses by booking bogus purchases. The AO issued notice under section 148 of the Act on 22.02.2013 after recording reasons which were duly served upon the assessee and finally the assessment was framed under section 143(3) read with section 147 of the Act making addition of full amount of bogus purchase of Rs.99,94,191/-.
4. The assessee challenged the reopening of assessment before Ld. CIT(A) who also dismissed the appeal of the assessee by holding that the AO after receiving information from the DGIT (Investigation) to the effect that assessee has availed the entries of bogus purchase from M/s. Siddhapad Trading Pvt. Ltd. to the tune of Rs.99,94,191/- justifying that the reopening was validly done.
5. After hearing both the parties and perusing the material, we find that the AO has tangible information in his possession on the basis of which the reasons were recorded forming belief that the income of the assessee has escaped assessment. In our view the re-opening the assessment on the basis of information from DGIT(Invest.) is quite valid as that is a tangible materials which the AO has while recording the reasons. We are ,therefore, inclined to uphold the order of Ld. CIT(A) on the issue of reopening and accordingly, we dismiss the ground raised by the assessee.
6. The issue raised by the assessee in the second ground of
The facts in brief are that the assessee made purchases from M/s. Siddhapad Trading Pvt. Ltd. amounting to Rs.99,94,191/-. The AO received information from the DGIT (Investigation) that the said party was only issuing bills and invoices without supplying actual materials and the case of the assessee was re-opened. A show cause notice was issued to the assessee in the reassessment proceedings as to why the same should not be added to the income of the assessee which was replied by the assessee by submitting that the assessee has made purchases from the said party with actually delivery of the goods. However, transport challan, delivery challan etc. could not be furnished before the AO. Besides, the assessee could not produce the supplier before the AO. Therefore, the AO treated the entire purchases from the said party as non genuine purchases and thus added the entire amount to the income of the assessee. The AO also noted in the assessment order that assessee has made corresponding sales against the said purchases thus concluding that the assessee might have purchased the actual materials from some other sources. The AO also observed that assessee has made purchases of Rs.99,94,191/- in cash and same was disallowed under section 40A(3) of the Act without prejudice.
In the appellate proceedings, the Ld. CIT(A) confirmed
5 M/s. Birla Cotsyn (India) Ltd. the addition by holding that the assessee has failed to establish the genuineness of purchases from M/s. Siddhapad Trading Pvt. Ltd. and thus justified the addition made by the AO.
The Ld. A.R. vehemently submitted before us that the order of the AO is full of contradictions as he has observed in the assessment order that assessee has made the corresponding sales vis-à-vis the said bogus purchases meaning thereby purchases were made from some other sources while the bills were procured from M/s. Siddhapad Trading Pvt. Ltd. Once the sales are not disputed by the AO then the action of the authorities below disallowing the entire purchases on the ground of genuineness should not be sustained as it is only the income on the said purchases which could be brought to tax and not the entire purchases. The AR while referring to bank statement of the assessee which are filed in the paper book controverted the finding of the AO that the assessee made cash purchases which are disallowed u/s 40A(3) of the Act and submiited that the purchase were made by account payee cheques. Per contra the ld DR relied on the orders of authorities below.
After hearing both the parties and perusing the relevant records as placed before us we observe that undisputable the purchase are made from bogus supplier which was rightly treated as non genuine for the want of verification and confirmation. But where the sales are not disputed, it is the income on the said bogus purchases which should be brought
6 M/s. Birla Cotsyn (India) Ltd. to tax and not the entire purchases. Even the AO recorded a findings in the assessment order that assessee purchased the goods from other sources and made corresponding sales. The co-ordinate bench of the Tribunal has been taking a view in such above cases and directing the income estimation ranging from 2% to 30% depending on the facts of each case. In the present case, we note that assessee has already declared a GP of 11.18% on the total purchases including the bogus purchase of Rs.99,94,191/-. Besides the observation of the AO that purchases were made in cash was also demolished by the AR with the proofs of payment by cheques. Under these circumstances, we are of the view that a reasonable percentage should be added to the income of the assessee which would be over and above the profit declared by the assessee. Accordingly, we direct the AO to assess the income of the said purchases @ 4% which would be over and above the regular GP declared by the assessee. Accordingly, the ground No.2 of the assessee is partly allowed.
Ground Nos.3 & 4 are not pressed and accordingly dismissed. In result the appeal of the assessee is partly allowed.
Order pronounced in the open court on 10.08.2018.