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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI D.T. GARASIA
Per D.T. Garasia, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 24.03.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.
The brief facts of the case are as under: Assessee is engaged in the business of trading of plastic raw materials under the name and style of M/s. Raj International. During the course of assessment proceedings, it was noticed that the assessee has shown purchases of Rs.54,07,740/- from two parties, as listed at para-1 of the assessment order, which were found to be appearing in the list of Hawala dealers who were engaged in providing bogus bills of purchases as found during the course of investigation conducted
2 Mr. Tushar S. Kamdar by DIT(lnv.), Mumbai and those parties were found to be black listed by Sales-tax department of Maharashtra Government. Notice under section 148 of the Act was accordingly issued and assessment was completed treating the purchase from the said party as bogus and adding 12.5% of said bogus purchase which amounts to Rs.6,75,967/- to the total income of the assessee.
Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has confirmed the order of the Assessing Officer (hereinafter referred to as the AO).
The assessee has given the written submission and in the written submission assessee pleaded before me that assessee is engaged in the business of trading of plastic raw materials under the name and style of M/s. Raj International. During the course of assessment proceedings, assessee has produced the evidence like bank statement, purchase bills, stock register, quantity details, reconciliation of purchase with corresponding sales, delivery challan and mode of transport/delivery in respect of purchase from above parties. The AO issued notice under section 113(b) of the Act to the parties from whom the purchases have been made. The assessee did not give the latest address and whereabouts of purchase parties, bank statement of hawala parties and assessee could not produce so called suppliers for verification. The assessee was not able to produce the parties. The assessee has submitted the bills in support of purchase and payment through account payee cheques. Assessee submitted that assessee has produced all the evidences which are necessary for 3 Mr. Tushar S. Kamdar deciding the appeal. The AO has rejected the books of accounts only on the ground that assessee could not produce the parties but to meet the justice AO has estimated 12.5% of bogus purchases. The assessee submitted that similar issue had come up before Hon’ble jurisdictional Bombay High Court in the case of Nikunj Eximp Pvt. Ltd. vs. CIT in ITA No.5604 of 2010 dated 17.12.2012 wherein the Jurisdictional High Court has decided that merely not producing the purchasers no addition can be made. Similarly, in the case of CIT vs. Mangalya Fabrics (Gujarat HC) wherein the assessee has made purchases to the tune of Rs.1.27 crores and the assessee could not produce the party but assessee has made purchase which was supported by bills, entries of books of account, payment of cheque and quantity details. The AO did not find inflation in purchase price or inflation in consumption, the addition based only on the ground that parties are not traceable and the addition on account of bogus purchase cannot be sustained. The assessee also relied upon the decision of Mumbai Tribunal in the case of Hiralal Chunnilal Jain vs. ITO in ITA No.4547/M/2014 and various judgments of Tribunal.
On the other hand, the Ld. D.R. relied upon the order of Revenue Authorities.
I have heard the rival contentions of both the parties. Looking into the facts and circumstances of the case, I find that assessee’s case was reopened on the basis of information received from the Sales Tax Department. The AO received the information that assessee had made purchases from Shrinath Trading Co. amounting
4 Mr. Tushar S. Kamdar to Rs.35,75,520/- and fraom Saileela Trading amounting to Rs.18,32,220/-. During the assessment proceedings, assessee has furnished the details with above two parties and AO has accepted. Assessee has submitted purchase bills, stock register, delivery challan, bank statement confirming the payment of said suppliers, ledger account, confirmations of sales against purchase quantity and ledger account of supplier. The case was reopened on the basis of the information that these two suppliers were declared as hawala dealers. The assessee was asked to produce these parties. Assessee was unable to produce the parties, therefore, AO has applied 12.5% on the purchase from above parties. I find that similar case had come up before Hon’ble Jurisdictional Bombay High Court in the case of Nikunj Eximp Pvt. Ltd. vs. CIT (supra) wherein it is held that the assessee was asked to produce the party from whom the purchases have been made. Assessee was unable to produce the party. Therefore, the addition was made. The Hon’ble Bombay High Court has held that merely not producing the party no addition can be sustained, because assessee’s purchases are supported by purchase bill, stock register, delivery challan, copies of bank statement confirming the payment of details of said suppliers, ledger account and confirmation of sales against purchase quantity. I also find that similar issue had come up before the Hon’ble Gujarat High Court in the case of Mangalya Fabrics wherein the assessee has made purchases to the tune of Rs.1.27 crores and assessee was not able to produce the party. The Hon’ble Gujarat High Court has held that no addition can be made merely because not producing the party. When
5 Mr. Tushar S. Kamdar the purchases are supported by bills, entry of books of accounts, payment by cheque and quantity details, no addition can be made. Therefore, respectfully following the decisions of Hon’ble Bombay High Court and Hon’ble Gujarat High Court, I delete the addition.
In the result, appeal is allowed.
Order pronounced in the open court on 31.01.2018.