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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA
O R D E R Per Shamim Yahya, A. M.: This appeal by the assessee is directed against the order by the Commissioner of Income Tax (Appeals) dated 03.07.2017 and pertains to the assessment year 2009- 10.
The first issue raised pertains to the validity of reopening. At the outset, the ld. Counsel of the assessee submitted that he shall not be pressing for this ground. Accordingly, this ground is dismissed as not pressed.
(A.Y. 2009-10) M/s. Ambernath Steel Tube and Sanitary Store vs. ITO 3. The next issue raised is that the ld. Commissioner of Income Tax (Appeals) erred in upholding the disallowance of bogus purchase amounting to Rs.1,43,345/-.
Brief facts of the case are as under: In this case, the Assessing Officer observed that during the year under consideration the assessee has entered into transactions with certain parties whose names are appearing in the list of Hawala Entry Providers published in the official website of Maharashtra Sales Tax Department. Majority of the transactions of the assessee with these parties pertains to purchases o the following parties and the details of transactions entered into by the assessee:-
Sr. No. Name of the Party Amount Rs. 1. Maruti Steel Traders Rs. 26,990/- 2. Shiv Industries Rs. 42,356/- 3 Balaji Trading Rs. 80,089/- Total Rs. 1,49,435/- That however, these notices were received back unserved with postal remark "not found". Meanwhile, on perusal of the data uploaded by the Sales Tax Department, on its official Website, it is seen that the above mentioned parties (from whom the assessee has claimed purchases/expenses) are involved in issuing of hawala bills. Therefore, further details were obtained from the Sales Tax Department, Mumbai, regarding these parties which consist of the report of the Sales Tax Authority, the statements of the concerned parties recorded by Sales Tax Authority and the affidavits submitted by the concerned parties before Sales Tax Authority. That the examination of such documents/data shows that these parties are involved in (A.Y. 2009-10) M/s. Ambernath Steel Tube and Sanitary Store vs. ITO issuing of Hawala bills. Detailed information such as copies of ledger accounts, bank statement, IT documents, etc. have also been called for u/s 133(6) from these parties, however, the notices issued u/s 133(6) to these parties were returned back unserved from postal authorities. That from all the above facts, it is clear that the purchases claimed by the assessee from these parties are not genuine.
Accordingly, the Assessing Officer proceeded to disallow 100% of the above purchase.
Upon the assessee’s appeal, the ld. Commissioner of Income Tax (Appeals) confirmed the disallowance.
Against this order, the assessee is in appeal before the ITAT.
I have heard both the counsels and perused the records. Upon careful consideration, I find that though overwhelming evidence has been produced by the authorities below that the purchases are bogus. However, as expounded by the Hon'ble jurisdictional High Court in the case of Nikunj Eximp Enterprises (in writ petition no 2860, order dt. 18.6.2014), when sales are not doubted 100% disallowance of bogus purchase cannot be done. However, the facts of the present case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee selling on account of non-payment of tax and others at the expense of the exchequer. In such situation, in my considered opinion, on the facts and circumstances of the case the 12.5% disallowance out of the bogus purchases
(A.Y. 2009-10) M/s. Ambernath Steel Tube and Sanitary Store vs. ITO meets the ends of justice. This is following the decision of the Hon’ble Gujarat High Court in the case of Simit P. Sheth (2013) 356 ITR 451, followed by the ITAT Mumbai Benches in a number of cases. Accordingly, I modify the order of the authorities below and direct that the disallowance in this case should be restricted to 12.5% of the bogus purchase.
The last issue raised is that the ld. Commissioner of Income Tax (Appeals) erred in upholding 20% disallowance of expenses. On this issue, the Assessing Officer disallowed 20% of the following expenses on the ground that they are not fully vouched for:
i. Conveyance expenses Rs.48,500/- ii. Telephone Expenses Rs.5,799/- iii. Delivery expenses Rs.1,82,490/- Total Rs.2,36,789/- 10. Upon the assessee’s appeal, the ld. Commissioner of Income Tax (Appeals) confirmed the same.
Against this appeal, the assessee is in appeal before the ITAT.
I have heard both the counsel and perused the records. On careful consideration I find that this is an adhoc disallowance and in the interest of justice I hold that 10% disallowance would meet the end of justice. Accordingly, the orders of the authorities below are modified and the disallowance is restricted to 10% in this case. The ld. Counsel of the assessee has fairly agreed to the above proposition.
(A.Y. 2009-10) M/s. Ambernath Steel Tube and Sanitary Store vs. ITO 13. In the result, this appeal by the assessee stands partly allowed. Order pronounced in the open court on 05.02.2018 Sd/- (Shamim Yahya) लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated : 05.02.2018 व.�न.स./Roshani, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. आयकर आयु�त(अपील) / The CIT(A) 3. आयकर आयु�त / CIT - concerned 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard File 6. आदेशानुसार/ BY ORDER,