MIHIR OVERSEAS,MUMBAI vs. ITO 24(1)(4), MUMBAI

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ITA 6810/MUM/2016Status: DisposedITAT Mumbai12 July 2018AY 2009-103 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal found that the addition of 30% by the CIT(A) was not justified as corresponding sales were accepted and a reasonable gross profit was shown. The Tribunal directed the AO to restrict the addition to 12.5% of the bogus purchases.

What were the facts?

The assessee, a manufacturer and trader of paper stickers, was found to have made bogus purchases of over ₹1.35 crore from parties issuing accommodation bills. The assessee provided purchase details but lacked PAN, VAT numbers, confirmations, transportation evidence, and stock registers.

What were the issues?

Whether the addition for bogus purchases is justified when corresponding sales are accepted and reasonable gross profit is shown. The extent to which such additions should be confirmed.

Which sections of the Income-tax Act were involved?

Section 144,Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, K Bench, Mumbai

Before: Shri R.C. Sharma & Shri Ravish Sood

For Appellant: Shri Hemant Mansukhlal Bilakhia
For Respondent: Shri V. Jenardhanan
Hearing: 28.06.2018Pronounced: 12.07.2018

This appeal has been filed by the assessee against the order of the CIT(A)-41, Mumbai dated 11.07.2016 for A.Y. 2009-10 in the matter of order passed under Section 144 r.w.s 147 of the Income Tax Act (hereinafter “the Act”).

2.

In this appeal the assessee is aggrieved for upholding the addition of 30% of bogus purchase by the CIT(A).

3.

We have heard the rival contentions carefully and gone through the orders of the Authorities below and found that the assessee is carrying on the business of manufacturer cum trader of paper stickers and other packing materials. The AO was in receipt of information from DGIT(Inv.), Mumbai that the assessee had indulged in bogus purchases of `1,35,98,732/- from various parties. The said parties had indulged in issuing accommodation bills without actual sale and delivery of goods.

M/s. Mihir Overseas Therefore, the case was re-opened. In response to the notice issued, the assessee had submitted the party wise purchases along with address and total invoice amount of each parties. However, the assessee had not provided the PAN and VAT number, confirmation, copy of the purchase bills, transportation evidence and stock register to prove the movement of goods. Being not satisfied with the explanation of the assessee the AO added 100% of the said purchase in assessee’s income.

4.

By the impugned order the CIT(A) restricted the addition to the extent of 30% of the total purchase.

5.

From the record we find that the assessee has explained corresponding sales with respect to the entire purchases. The sales have not been disregarded. Before the AO assessee has also filed party-wise purchase along with address and total invoiced amount of each party. Merely because the assessee had not provided the VAT number of these parties the AO has added the amount. Since the corresponding sales have been accepted and the assessee had shown reasonable gross profit on sale, therefore, confirming the addition to the extent of 30% is not justified. Keeping view the totality of the facts and circumstances we direct the AO to restrict the addition to the extent 12.5% of such bogus purchases. We direct accordingly.

6.

In the result, the appeal filed by the assessee is allowed in part.

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