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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SRI MAHAVIR SINGH
Aayakr ApIlaIya AiQakrNa “SMC” nyaayapIz maMuba[- mao. IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI श्री महावीर स िंह, न्याययक दस्य के मक्ष । BEFORE SRI MAHAVIR SINGH, JUDICIAL MEMBER Aayakr ApIla saM./ (inaQa-arNa baYa- / Assessment Year 2010-11) Nikhil R. Dharia The Asst. Commissioner of B-7, Utkarsh Tilak Nagar, V.P. Income Tax-19(2) having Vs. Road, Mumbai -400 004 address at Matru Mandir, Tardeo, Mumbai-400 007 .. (p`%yaqaaI- / Respondent) (ApIlaaqaI- / Appellant) स्थायी लेखा िं./PAN No. ACRPJ2592B अपीलाथी की ओर े / Appellant by : Shri Neha Paranjpe, AR प्रत्यथी की ओर े / Respondent by : Shri Kailash Kanojiya, DR ुनवाई की तारीख / Date of hearing: 12.02.2019 घोषणा की तारीख / Date of pronouncement : 12.02.2019 AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-53, Mumbai [in short CIT(A)], in appeal No. CIT(A)-53/IT-238/ITO-19(2)/2017-18 vide dated 02.04.2018. The Assessment was framed by the Income Tax Officer, ward -19(2), Mumbai (in short ‘ITO/ AO’) for the A.Y. 2010-11 vide dated 08.03.2016 ITAs no.3818/Mum/2018 under section 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of assessee is against the order of CIT(A) confirming the addition made by AO adding the whole amount as bogus purchase to the return income of the assessee.
Briefly stated facts are that the assessee engaged in retail, manufacturing and trading in jewellery valuables etc. 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. 3,90,432/- as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: - Name of party Amount PK Trading Co 90,328 Kotsons Impex Private Limited 98,838 Riddihi Siddhi Enterprise 22,776 Siddhi Enterprises 1,56,104 Venus Steel 22,386 Total 3,90,432/- 4. The AO issued noticed under section 133(6) to the parties which returned back and assessee failed to produce these parties. 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. According to the AO, the assessee failed to establish the genuineness of the purchase and accordingly, he made addition of unproved purchase at ITAs no.3818/Mum/2018 ₹ 3,90,432/- to the returned income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who confirmed the addition made by the AO by observing as under: - “4.5 It is an undisputed fact that the assessing officer identified party based on information received from Investigation Wing. On his part, the AO has also gone into the issue by sending 133(6) notices and deputing an inspector to serve the notices and make inquiries. I do not agree that the purchases of such heavy items will not have records of transportation. Irrespective of who pays for the transportation, the delivery challan in genuine cases will make a mention of the vehicle no through which goods are sent. The Tax Audit Report does not show any quantitative details being maintained. Stock register is not maintained. This is a case of manufacturer. The link between purchases and sales cannot be ascertained. The assessing officer has used the information received from investigation wing as starting point. However, the appellant is unable to discharge his onus of proving these purchases. I also do not find the contention reasonable that the disallowance should not be made since the material such as statement recorded before Sales Tax Authority was not provided. Such parties are not traceable and appellant even after being informed about this has not provided any ITAs no.3818/Mum/2018 alternative current address of these parties. The assessing officer has discussed in detail the onus of the assesse and that such supplier are the witness of the assesse. The disallowance has not been made solely on the basis of statements of third parties. It is made on the failure to demonstrate the genuineness of purchases. Further, the appellant is a manufacturer. Hence, a rate of 12.5% of disallowance is not justified in it case. It is also not the case that the disallowance has resulted in unreasonable GP. The GP disclosed of 25.05% increased to only 27.80 % after the disallowance. Thus the grounds of appeal are dismissed.”
5. I have considered the issue and gone through the facts and circumstances of the case. I find from the facts of the case and argument of both the sides that the CIT(A) has confirmed the action of the AO by adding the whole amount as bogus purchase, which according to me is on higher side. I find that the assessee filed copy of Tribunal’s order in assessee’s own case for AY 2009-10 in dated 09.10.2018, wherein Tribunal has estimated the profit rate 25% by observing in Para 4.9 as under: - “4.9. If the ratio laid down by Hon'ble jurisdictional High Court in the aforesaid case of M/s Nikunj Eximp. Enterprises Pvt. Ltd.((supra)) is analyzed with the facts of the present appeal, it is noted that the assessee is engaged in the ITAs no.3818/Mum/2018 business of manufacturing of panels, declared income of Rs.33,85,910/- in his return filed on 21/09/2009. The assessee made purchases of Iron & Steel Sheets for manufacturing of panels from various parties. The claim of the assessee is that the assessee duly recorded the purchases in his books of accounts and the payment was made through account payee cheque. It was explained that in the case of Riddhi Siddhi Enterprises, the brokers letter was submitted along with other documents and in the case of Venus Steels, the purchases were made in the month of April, therefore, it was too early for any businessman to start taking accommodation bills. It is noted that the Ld. Commissioner of Income Tax (Appeal), while adjudicating the issue specifically mentioned that the assessee entered into Hawala transactions for purchase of goods from four parties and during reopening of assessment, the Ld. Assessing Officer called for certain details and further made enquiries by way of notices sent under section 133(6) of the Act and some of the transactions were not found genuine. Thus, the genuineness of the transactions could not be verified. However, the ld. Assessing Officer concluded that the assessee did not purchase goods from the said parties and thus he made the addition. The names of the parties was figuring in the Sales ITAs no.3818/Mum/2018 Tax Department List, who are issuing accommodation entries without effecting the actual delivery of goods. The Sales Tax Department also conducted independent enquiries in the cases of Hawala Parties, wherein, it was concluded that these parties are providing accommodation entries only. The assessee was asked to produce the parties from whom the purchases were allegedly claim to have been made to the tune of Rs.3,61,415/-. The assessee did not produce the parties for verification and also could not produce the stock register. All these facts have been mentioned in the impugned order. It is further noted that the First Appellate Authority has also relied upon various case laws, therefore, the same are not being repeated. The fact remains that the claimed parties never supplied any material to the assessee nor the assessee produce the stock register and the purchases did not match with the sales. Considering the totality of facts and the judicial pronouncements discussed hereinabove, I am of the considered view that there cannot be sale without purchases even it is presumed that the assessee purchased the goods from the grey market, therefore, only the profit element embedded therein should be considered. Since, the assessee has already declared gross profit @ 26.04% and net profit @ 7 ITAs no.3818/Mum/2018 21.06%, I deem it appropriate to make the disallowance @ 25% (over and above the already declared by the assessee) of such bogus purchases i.e. Rs.3,61,415/-. This will cover the leakage of Revenue. Thus, the appeal of the assessee is partly allowed.”
6. Taking a consistent view, I also direct the AO to recompute the income after disallowing 25% of bogus purchases. Accordingly, the appeal of the assessee is partly allowed.
In the result, the appeal of assessee is partly allowed.
Order pronounced in the open court on 12.02.2019. AadoSa kI GaaoYaNaa Kulao mao idnaMk 12.02.2019 kao kI ga[- . (महावीर स िंह /MAHAVIR SINGH) (न्याययक दस्य/ JUDICIAL MEMBER) मुिंबई, ददनािंक/ Mumbai, Dated: 12.02.2019 सुदीप सरकार, व.निजी सचिव / Sudip Sarkar, Sr.PS