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Income Tax Appellate Tribunal, MUMBAI BENCHES “E”, MUMBAI
Before: SHRI SHAMIM YAHYA (AM) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the assessee against order dated 22.01.2016 passed by the Ld. Commissioner of Income Tax (Appeals)14, Mumbai, for the assessment year 2009-10, whereby the Ld. CIT (A) has dismissed the appeal filed by the assessee against assessment order passed u/s 143 (3) read with section 147 of the Income Tax Act, 1961 (for short ‘the Act’). 1. Brief facts of the case are that the assessee company filed its return of income for the A.Y. 2009-10 declaring the total income of Rs. 2,73,033/-. The return was processed u/s 143 (1) of the Act. Subsequently, on the basis of information received from the office of the Director General of Income Tax (Inv.) that the assessee company had made bogus purchases during the previous year, the case was re-opened u/s 147 of the Act to verify the bogus purchases in question. Notice u/s 148 was issued in response thereof the assessee 2 Assessment Year: 2009-10 submitted that the return filed u/s 139 (1) may be treated as return filed in response to notice u/s 148 of the Act.
During re-assessment proceedings, the assessee was asked to furnish the details of purchases made, however, the assessee failed to submit lorry receipts, delivery challans and other documents to prove the genuineness of purchases. The assessee also failed to produce stock register for verification. No response was received from the parties to whom notices u/s 133 (6) of the Act were issued. Since, the assessee failed to establish the genuineness of purchase by adducing convincing evidence, the AO made disallowance of bogus purchases amounting to Rs. 39,62,369/-. The assessee challenged the assessment order before the first appellate authority. The Ld. CIT (A) after hearing the assessee in the light of the evidence on record, confirmed the addition made by the AO on account of bogus purchases made by the assessee.
Aggrieved by the order of Ld. CIT (Appeals), the assessee has preferred this appeal before the Tribunal on the following effective grounds:-
1. “On the facts and under the circumstances of the case and in law, the Learned CIT (A) erred in confirming order of the AO made u/s 147 on the ground of reopening assessment relying on information received from Sales tax department and without independently applying his own mind which is bad in law and hence such reopening of assessment is not called for.
2. On the facts and under the circumstances of the case and in law, the Learned CIT (A) erred in confirming the action of the AO of treating the purchases of Rs. 39,62,367/- from various parties as bogus purchases.
3. On the facts and under the circumstances of the case and in law, the Learned CIT (A) erred in ignoring the documents 3 Assessment Year: 2009-10 produced before him in order to prove genuinely of the transaction such as bank books, suppliers ledger accounts, delivery challans of the supplier, storage slips from warehouse keeper etc. 4. On the facts and under the circumstances of the case and in law, the Learned CIT (A) erred in not granting opportunity to the assessee to cross examine the parties and accepting the additions made by the AO in his order relying on information received from sales tax department. 5. On the facts and under the circumstances of the case and in law, the Learned CIT (A) erred in confirming the action of the AO by ignoring the fact that there can be no sales if there are no purchases made and hence without prejudice the CIT (A) ignored in deleting the proportionate sales of the goods which AO ought to treat as bogus purchase.”
Before us, the Ld. counsel for the assessee submitted that he does not want to press Ground No. 1 i.e. reopening of the assessment, hence, the first ground of appeal of the assessee is dismissed as not pressed.
5. Ground No. 2 to 5 pertain to the addition of Rs. 39,62,367/- made by the AO on account of bogus purchases made by the assessee during the year relevant to the assessment year under consideration. The Ld. Counsel submitted that the Ld. CIT (A) has passed the impugned order ignoring the documentary evidence produced before the AO to prove the genuineness of transaction such as statements of bank accounts, supplier’s ledger accounts, delivery challans of the suppliers, storage slips from warehouse keepers etc. The Ld. counsel further contended that the assessee was not granted opportunity to cross examine the parties, whose statements were relied upon by the AO. The Ld. counsel further contended 4 Assessment Year: 2009-10 that since the AO has accepted the sale, the Ld. CIT (A) ought to have deleted the addition as there cannot be any sale without purchase.
6. On the other hand, the Ld. Departmental Representative (DR) relying on the order passed by the Ld. CIT (A) submitted that since the assessee has failed to prove the genuineness of purchases and since it had been established that the assessee had obtained the bogus bills from the hawala dealers, without purchasing any goods from them, the Ld. CIT (A) has rightly confirmed the addition made by the AO.
We have heard the rival submissions and carefully perused the material on record. The only grievance of the assessee is that the Ld. CIT (A) has wrongly confirmed the action of AO, in holding the purchases amounting to Rs. 39,62,367/- as bogus and making addition of said amount to the income of the assessee. The evidence on record suggest that assessee has failed to discharge the onus of proving the genuineness of the purchases by adducing relevant evidence during the assessment proceedings. However, since the AO has accepted the sale during the year relevant to the assessment year under consideration, 100% addition is not justified. Hence, there is substance in the contention of the Ld. Counsel that there cannot be any sale without purchase, therefore the entire amount of purchases in question cannot be added to the income of the assessee.
The Hon’ble Bombay High Court while upholding the decision of Mumbai Tribunal In CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd. 372 ITR 619 (Bom) has held that merely because the suppliers had not appeared before the Assessing Officer or the CIT (A) one could not conclude that the purchases were not made by the respondent/assessee. The Hon’ble Gujarat High Court in CIT vs. Simit P. Seth 356 ITR 451(Guj) has upheld 5 Assessment Year: 2009-10 the decision of the Tribunal and sustained the addition 12.5% of the total bogus purchases holding that only profit element embedded in such purchases can be added to income of the assessee. Hence, in our considered view, the order passed by the Ld. CIT(A) is not based on the law laid down by the Hon’ble Bombay High Court and the Hon’ble Gujarat High Court. In view of the aforesaid judgments, we are of the considered opinion that addition of 12.5% of the bogus purchases is justified in the present case. We, therefore, set aside the impugned order passed by the Ld. CIT(A) and restrict the addition to 12.5% of the total amount of bogus purchases made by the assessee and partly allow the appeal of the assessee. Accordingly, we direct the AO to make addition of 12.5% of the total amount of bogus purchases made by the assessee.
In the result, appeal filed by the assessee for assessment year 2009- 2010 is partly allowed.
Order pronounced in the open court on 21st February, 2018. (SHAMIM YAHYA) JUDICIAL MEMBER म ुंबई Mumbai; दिन ुंक Dated: 21/02/2018 Alindra, PS आदेश प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6 Assessment Year: 2009-10