ITO 32(2)(3), MUMBAI vs. MAYUR R. KAMDAR, MUMBAI

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ITA 5089/MUM/2015Status: DisposedITAT Mumbai28 February 2018AY 2009-104 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the decision of the CIT(A) to restrict the disallowance to 3% of alleged bogus purchases. It reasoned that while the assessee's turnover was not doubted and payments were through banking channels, the inability to produce confirming parties and unserved notices cast doubt on the transactions.

What were the facts?

The assessee, engaged in building material trading, was subjected to reassessment based on information about bogus purchase bills. The Assessing Officer added Rs. 90,43,090/- on account of alleged bogus purchases, considering a higher Gross Profit Rate.

What were the issues?

The primary issue was the validity of additions made on account of alleged bogus purchases and the extent of disallowance permissible when primary purchase documents and banking channel payments exist but third-party confirmation is absent.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “J” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY, JM & SHRI MANOJ KUMAR AGGARWAL, AM

Heard together (2 matters)

ITA No.5089/Mum/2015
ITA No.5741/Mum/2015

Read from the judgment's own cause title. This page is filed under one of them.

Per Manoj Kumar Aggarwal (Accountant Member) 1. These are cross appeal for Assessment Year [AY] 2009-10 which contest stand of Ld. Commissioner of Income-Tax (Appeals)-44 [CIT(A)], Mumbai, Appeal No.CIT(A)-44/ITA-135/32(2)(3)/2014-15 dated 01/09/2015 qua addition on account of alleged bogus purchases. The assessment for impugned AY was framed by Ld. Income Tax Officer- 32(2)(3) [AO] u/s 143(3) read with Section 147 of the Income Tax Act, 1961 on 16/03/2015 wherein the assessee has been saddled with addition of Rs.90,43,090/- on account of certain alleged bogus purchases. 2.1 Facts leading to the same are that the assessee being resident individual engaged in the business of trading of building material under proprietary concern namely N.M.Traders was subjected to reassessment proceedings for impugned AY vide issuance of notice u/s 148 dated 16/01/2014 which was followed by statutory notices u/s 143(2) and 142(1). The original return of income was filed by the assessee at Rs.4,58,690/- which was processed u/s 143(1). 2.2 The reassessment proceedings were initiated upon receipt of certain information from Sales Tax Department, Maharashtra & DGIT (Investigation) regarding dealers indulging in bogus purchase bills and it was noted that the assessee stood beneficiary of such bogus purchase bills to the tune of Rs.4,52,28,619/- from ten such parties. The assessee defended the purchases made by him but notices issued u/s 133(6) to confirm the transactions remained un-served with remarks like left / not ITA No.5741/Mum/2015 Mayur Kamdar Assessment Year- 2009-2010 known. After considering assessee’s submissions, documentary evidences and certain judicial pronouncements, Ld. AO adopted Gross Profit Rate of Rs.22.61% as against 6.07% reflected by the assessee against turnover of Rs.546.63 Lacs and added the differential profit of Rs.90,43,090/- to the income of the assessee.

3.

Aggrieved, the assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated 01/09/2015 where Ld. CIT(A) restricted the disallowance to 3% of alleged bogus purchases which came to Rs.13,56,900/- and deleted the balance. Aggrieved, the assessee as well as revenue is in appeal before us.

4.

The Ld. Departmental Representative [DR] submitted that the addition was on lower side whereas Ld. Authorised Representative for assessee [AR] pleaded for some more relief on the premise that the assessee had reconciled the sale and purchase transactions.

5.

After considering rival contentions, we find no reason to interfere with the stand of Ld. CIT(A) since the assessee was engaged in trading activities and could not achieve the sales turnover without purchase of material. The turnover of the assessee has not been doubted by the revenue and the assessee is in possession of primary purchase documents & further, the payments are through banking channels. The assessee is able to reconcile the sale and purchase transactions. At the same time, the assessee could not produce any single party to confirm the transactions and notices issued u/s 133(6) were returned back un- served which cast a serious doubt on assessee’s claim. Therefore, in such a situation, the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for Mayur Kamdar Assessment Year- 2009-2010 profit element earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against alleged bogus purchases, which Ld.CIT(A) has rightly done. Therefore, finding the same quite fair and reasonable, we dismiss both the appeals.

6.

Resultantly, both the appeals stands dismissed. Order pronounced in the open court on 28th February, 2018.

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