ITO-19(3)(1), MUMBAI vs. RAMESHBHAI KHIMJIBHAI THUMMAR, MUMBAI

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ITA 2236/MUM/2024Status: DisposedITAT Mumbai20 August 2024AY 2011-125 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal upheld the principle of estimating profit on alleged bogus purchases when primary evidence is furnished. It referred to a Gujarat High Court decision that supports estimating profit in such circumstances.

What were the facts?

The Assessing Officer (AO) made a 100% addition for alleged bogus purchases based on information about hawala bills. The assessee provided purchase bills and bank statements, but the AO found them lacking supporting documents like transport receipts and weighbridge slips.

What were the issues?

The primary issue was whether the entire amount of alleged bogus purchases should be added to the assessee's income, or if a portion representing profit should be estimated.

Which sections of the Income-tax Act were involved?

Section 148

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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: SHRI NARENDRA KUMAR BILLAIYA, HONBLE & SHRI SANDEEP SINGH KARHAIL, HONBLE

For Respondent: Smt. Mahita Nair, Sr. D/R
Hearing: 20/08/2024Pronounced: 20/08/2024

PER NARENDRA KUMAR BILLAIYA, AM : I.T.A. No. 2238 & 2236/Mum/2024, are two separate appeals by the revenue preferred against two separate orders dated 28/02/2024 by NFAC, Delhi, [in short “ld. CIT(A)”] pertaining to Assessment Years 2010-11 & 2011-12. 2. Since common grievance is involved in both the appeals, they were heard together and are disposed off by this common order for the sake of convenience and brevity.

3.

The common grievance in both the appeals relate to the restriction of addition to 12.5% of the alleged bogus purchases from 100% addition made by the AO.

4.

None appeared on behalf of the assessee in spite of notice. Therefore, we proceed to decide the appeal ex-parte qua the assessee.

5.

We have heard the ld. D/R and carefully perused the orders of the lower authorities.

6.

Briefly stated the facts of the case are that during the course of scrutiny assessment proceedings, the AO was seized with an information received form the DGIT (Inv.), Mumbai, regarding the issue of hawala bills/accommodation entries from four parties from whom the alleged purchases were made amounting to Rs.3,16,07,230/-. The return of income was accordingly selected for scrutiny assessment by issuing of notice u/s 148 of the Act. Assessee was confronted with the information. The assessee submitted copy of purchase bills, purchase & sale register and bank statement copies but the AO was of the opinion that the purchases are not supported by transport receipts, octroi receipt for payment of octroi duty nor there was receipt of weighbridge for weighing of goods, excise gate pass, goods inward register maintained at godowns/warehouse/storage house etc. The AO concluded by adding 100% of the bogus purchases.

6.1.

The assessee challenged the addition before the ld. CIT(A), who after considering the facts in totality and drawing support from several judicial decisions and comparing the gross profit rate of the current year with the gross profit rate of earlier years, the ld. CIT(A) restricted the addition to 12.5% of the alleged bogus purchases and confirmed the additions to the extent of 12.5% and deleted the balance addition.

7.

We find that under identical circumstances, when the assessee has furnished the primary evidence, the Hon'ble Courts have estimated the profit on the alleged bogus purchases.

7.1.

The Hon'ble Gujarat High Court in the case of PCIT vs. Rakesh Kailashchand Jain [2023] 156 taxmann.com 82 (Gujarat), has held as under:- “4. When the appeals were taken up for hearing, learned advocate appearing for the Revenue submitted that the order of the Tribunal in the case of Pr. CIT v. Pankaj K. Choudhary was carried in appeal before this court and this court by an oral order dated 7-3-2023] in [Tax Appeal No. 617 of 2022 held as under:

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