RAMNIKLAL KUNVERJI VORA HUF,MUMBAI vs. ITO WD 18(2)(2), MUMBAI

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ITA 3984/MUM/2016Status: DisposedITAT Mumbai09 February 2018AY 2011-125 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal directed the AO to allow credit for the Gross Profit (GP) declared by the assessee and estimate the GP at 8% of the bogus purchases, reducing the addition. For the disallowance of expenses, the Tribunal directed to estimate GP at 10% of the addition, also reducing the disallowance.

What were the facts?

The Assessing Officer (AO) made an addition for bogus purchases amounting to Rs. 86,17,499/- as the assessee failed to produce the parties for verification. The CIT(A) partly allowed the appeal, confirming an addition of Rs. 21,54,375/- (25% of purchases). Another addition of Rs. 63,187/- was made on account of disallowance of telephone and sundry expenses for lack of proof.

What were the issues?

The primary issues were the genuineness of purchases from certain parties and the disallowance of expenses due to lack of supporting evidence.

Which sections of the Income-tax Act were involved?

Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI

Before: SHRI D.T. GARASIA & SHRI RAJESH KUMAR

For Appellant: Shri M.S. Mathuria, A.R
For Respondent: Shri M.C. Omi Ningshen, D.R
Hearing: 04.01.2018Pronounced: 09.02.2018

Per D.T. GARASIA, Judicial Member:

1.

The present appeal has been preferred by the assessee against the order dated 31.03.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2011-12.

2.

The brief facts of the case are that during the year the Assessing Officer (hereinafter referred to as the AO) found that assessee had made bogus purchases from following parties:

1.

Pooja Traders 5,25,000 2. Trade Link 6,44,998 3. Mayur Trading Co. 9,56,250 4. Aadheshwr Enterprises 18,73,125 5. Shree Ambika Traders 22,57,500 6. Rushabh Sales Corpn. 23,60,626 Total 86,17,499

3.

The assessee was asked to produce the above parties for verification. There was no compliance of notice under section 133(6). Therefore, the AO has made the addition on account of bogus purchases of Rs.86,17,499/-.

4.

Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has partly allowed the claim of the ground No.1 of the assessee by observing as under:

“20. As stated in the preceding paragraphs, in the instant case too, all the facts and circumstances outlined above leads to the conclusion that although the purchases made by the appellant from the six parties mentioned above during the year under consideration cannot be summarily rejected but at the same time it difficult to accept that the purchases shown on the invoices/bills issued by these parties are as per the prevailing market price of those materials or actually been made from such parties and might have been purchased in the grey market. The appellant has not placed any evidence on record that the goods purchased from the above parties were at arms' le ngth price. The appe llant has also not place d on recor d any comparable bills/invoices for purchases of similar items made from other parties to establish that the purchases from the six parties in question were at par with the purchases made from other parties during the period under consideration. The possibility of such purchases from unregistered dealers without invoices cannot be ruled out. In view of the above, the correctness of the purchase prices mentioned on such bills/invoices issued by the six parties in question cannot be accepted and some additional profit needs to be estimated on such purchases. As stated above, following the guidelines laid down in the case of Vijay Protein P Ltd., disallowance of 25% on such alleged bogus purchases of Rs. 86,17,499/- i.e., Rs. 21,54,375/- is confirmed that needs to be added

3 M/s. Ramniklal Kunverji Vora HUF to the total income of the assessee on account of alleged bogus purchases for the year under consideration and the balance addition of Rs.64,63,1241- is hereby deleted. Hence, ground no. 1 is partly allowed.”

5.

During the course of hearing, the Ld. A.R. submitted that similar issue had come up before the Tribunal and the Tribunal has allowed such claim, therefore, this claim should be allowed. He relied upon the following decisions: 1. ACIT vs. Tarla R. Shah in

2. Fancy Wear vs. ITO in ITA No.1596/M/2016 3. Heeralal Meghraj Doshi vs. ACIT in ITA No.3015 and 3016/M/2015 4. ITO vs. Karsan Nandu in ITA No.2651/M/2016

6.

On the other hand, the Ld. D.R. relied upon the order of the Ld. CIT(A).

7.

We have heard the rival contentions of both the parties and also have gone through the orders of the Tribunal submitted by the assessee. Looking to the facts and circumstances of the case we find that the assessee has already declared the GP. Hence, AO is directed to allow the credit of GP declared by the assessee and deduct the same from 25% and estimate the GP @ 8% of total bogus purchases which comes to Rs.6,89,400/-.

8.

In the result this ground of the appeal is partly allowed.

9.

The next issue relates to disallowance of 20% of telephone expenses of Rs.1,89,140 and sundry expenses of Rs.1,26,796/- totaling to Rs.63,187/- on adhoc basis.

4 M/s. Ramniklal Kunverji Vora HUF The brief facts of the case are that during the course of assessment proceedings, the AO asked the assessee to furnish documentary evidence in support of various expenses in P & L A/c. Since no proof was submitted by the assessee, the genuineness and authenticity of the expenses could not be verified and established. Therefore, the AO disallowed 20% of telephone expenses and sundry expenses i.e. Rs.63,187/- was disallowed and added it to the total income of the assessee for the year under consideration.

10.

Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has dismissed this ground by observing as under: “It is observed that no written or verbal argument was made during appellate proceedings. Nothing is brought on record by the appellant that the addition made by the AO is unjustified. Hence, I do not have any option but to confirm the above addition of Rs. 63,187/-. Hence, the ground of appeal no. 2 is dismissed.”

11.

We have heard the rival contentions of both the parties. Looking to the facts and circumstances of the case we find that the assessee has already declared the GP. Hence, AO is directed to allow the credit of GP declared by the assessee and deduct the same from 20% and estimate the GP @ 10% of total addition which comes to Rs.31,593/-.

12.

In the result, this ground of the appeal of the assessee is partly allowed.

Order pronounced in the open court on 09.02.2018.

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