JAGRUTI G. METHA,MUMBAI vs. ITO WD 3(5), KALYAN

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ITA 6910/MUM/2016Status: DisposedITAT Mumbai09 November 2017AY 2009-104 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal restored the matter to the AO to verify the actual VAT paid by the assessee. The addition should be reduced by the amount of VAT actually paid, meaning the final addition would be 12.5% of bogus purchases minus the VAT paid.

What were the facts?

The assessee, engaged in hardware trading, was found to have made bogus purchases from hawala dealers who issued fake invoices without supplying goods. The Assessing Officer added 100% of these bogus purchases to the assessee's income.

What were the issues?

The primary issue was the addition of bogus purchases to the assessee's income. A secondary issue was the extent to which the addition should be reduced considering VAT paid on these purchases.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “E”, BENCH MUMBAI

Before: SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI, JM

For Appellant: Shri Bhupendra Shah
For Respondent: Shri V. Justin
Hearing: 08/11/2017Pronounced: 09/11/2017

आदेश / O R D E R PER R.C.SHARMA (A.M):

1.

These are the appeals filed by assessee against the order of CIT(A)-1, Thane dated 19/09/2016 for A.Yrs.2009-10, 2010-11 and 2011- 12 in the matter of order passed u/s.143(3) r.w.s. 147 of the IT Act.

2.

Common grounds taken in all the years relate to reopening of assessment and estimation of profit on the alleged bogus purchases made by the assessee.

3.

Rival contentions have been heard and record perused. Facts in brief are that assessee is engaged in trading of hardware and engineering goods. Certain information has. been received from the DGIT (Inv), Pune 6912/Mum/2016 Smt. Jagruti G. Mehta vide letter No.PN/ DGTT/Sales Tax Hawala/2012-13/2179 dated 6-2-2013 to the effect that the Sales Tax Department, Mumbai has unearthed a racket involving more than 1935 hawala dealers involved in issuing bogus invoices to allow a trader to claim tax credits and there are more than 37,000 beneficiaries who claimed such bogus purchases as well as bogus tax credits. It is also revealed from the statements recorded by the Sales Tax Dept u/s.14 of Maharashtra Value Added Tax Act, 2002, of the Hawala Dealers and the Affidavits filed by them, that the hawala dealers, in fact, did not do any genuine business and they have only issued bogus sale bills to various parties without supplying any goods. There are no corresponding purchases to such bogus sale bills. The bogus sale bills were supplied on commission basis. The payments received in the form of cheques have been credited in the bank .a/c. Thereafter cash is withdrawn and returned to the beneficiary after deducting their commission. Thus, the investigation carried out by the Sales Tax Department revealed that the hawala operator posing as the 'seller' exists only on paper, issues fake bill to a concern and gets a cut in return. The beneficiary, in turn, gets the input tax credit on the material, he had never purchased in reality. AO added 100% of such bogus purchases in assessee’s income.

4.

By the impugned order CIT(A) restricted the addition to the extent of 12.5% after following the decision of Gujarat High Court in case of Simit P Seth.

6912/Mum/2016 Smt. Jagruti G. Mehta 5. Against the above order of CIT(A) assessee is in further appeal before us. It was argued by learned AR that assessee had already paid VAT on the alleged bogus purchases, therefore, there is no benefit for such VAT. We found that while restricting addition to the extent of 12.5%, CIT(A) has also taken cognizance with regard to VAT having not been paid by the assessee and assessee having been benefitted by the amount of VAT which he was required to pay in case of genuine purchases. We also found that the GP rate declared by the assessee is 13.31% which appears to be reasonable looking into the nature of trade, assessee being engaged. Considering the totality of facts and circumstances of the case, we restore the matter back to the file of AO and to verify the actual VAT paid by assessee and direct the AO to reduce the amount by VAT actually paid by the assessee while computing addition @12.5% of the bogus purchases. Meaning thereby, the total addition to be upheld should be 12.5% minus actual VAT paid by the assessee. AO to verify the actual payment of such VAT and decide the issue afresh in terms of our above observation.

6.

In the result, appeals of assessee are allowed in part. Order pronounced in the open court on this 09/11/2017 Sd/- Sd/- (RAM LAL NEGI) (R.C.SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 09/11/2017 Karuna Sr.PS

6912/Mum/2016 Smt. Jagruti G. Mehta

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