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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI D.T. GARASIA, JM & SHRI MANOJ KUMAR AGGARWAL, AM
Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeals by revenue for Assessment Years [AY] 2010-11 & 2011-12 assails separate order of first appellate authority qua certain relief provided to the assessee against alleged bogus purchases. Since, common issues are involved in both the appeal, we dispose-off the same by way of this common order for the sake of convenience & ITA.No.113 & 114/Mum/2016 Binal Damji Boricha Assessment Years-2010-11 & 2011-12 brevity. First we take up, AY 2010-11 which contest the order of Ld. Commissioner of Income-Tax (Appeals)-9 [CIT(A)], Mumbai, Appeal No.CIT(A)-9/Cir.4/32/2014-15 dated 07/10/2015 by raising the following effective grounds of appeal:- 1. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.1,27,67,428/- made u/s 69C of the I.T. Act, on the basis of comparison of G.P ratio of the years where there was no established non-genuine purchase, without appreciating the fact that if information of such purchase is not received by the department in those years does not ipso facto establish that there were no such purchases in those years. 2. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in erroneously taking GP of earlier years, where no information was received related to bogus purchases, as a touchstone for every subsequent years despite the fact of conclusive evidence of non-delivery of goods from the suppliers who have given only bill for year under consideration. 3. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.1,27,67,428/- even though Shri Paras Gandhi, who was running the bogus firms from whom assessee has shown purchases, has admitted that the said concerns were involved only in the business of issuing sales invoices without actual sale of goods.” The assessment for impugned AY was framed by Ld. Income Tax Officer 4(3)(1), Mumbai [AO] u/s 143(3) read with Section 147 of the Income Tax Act,1961 on 24/03/2014. 2.1 Facts leading to the same are that the assessee being resident individual engaged in the business of trading in paper & Board paper under proprietorship concern namely National Paper Agency was subjected to an assessment u/s 143(3) read with Section 147 for impugned AY on 24/03/2014 at Rs.1,37,34,940/- after addition of certain bogus purchases for Rs.1,28,61,030/-. The original return was filed on 18/09/2010 at Rs.8,69,192/- which was processed u/s 143(1). The solitary issue involved in the appeal is addition against bogus purchases. 2.2 The reassessment proceedings were initiated upon receipt of certain information from Sales Tax Department, Maharashtra regarding dealers indulging in bogus purchase bills and it was noted that the ITA.No.113 & 114/Mum/2016 Binal Damji Boricha Assessment Years-2010-11 & 2011-12 assessee stood beneficiary of such bogus purchase bills to the tune of Rs.2,83,64,456/- from five such parties. Consequently, notice u/s 148 dated 01/03/2013 was issued to the assessee which was followed by statutory notices u/s 143(2) and 142(1). The assessee reflected turnover of Rs.9.76 crores with Gross Profit Rate of 2%. 2.3 The assessee contended that the purchases were genuine and furnished purchase invoices, bank statement, balance confirmation etc. However, Ld. AO noted that all the alleged bogus concerns were run by a single person namely Paras Gandhi who, before sales tax authorities, upon oath admitted to be in the business of issuing sales invoices against commission and hence, the purchases were not genuine. The Ld. AO also noted that the assessee failed to provide delivery challans to substantiate the purchases. Finally, Ld. AO worked out peak amount of bogus purchases which came to Rs.1,28,61,030/- and added the same to the income of the assessee.
3. Aggrieved, the assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated 07/10/2015. The assessee reiterating the said contentions submitted that the purchases were genuine since the assessee produced ledger extracts, copy of invoices, bank statement evidencing payments made to the said parties and moreover, the turnover achieved by the assessee was not disturbed and there could be no sale without actual purchases. The assessee also drew attention to the comparative chart of Gross Profit reflected by assessee in other years. The Ld. CIT(A), after considering the same in the light of judicial pronouncements, noted that Ld. AO did not confront the adverse material to the assessee and also did not point out any ITA.No.113 & 114/Mum/2016 Binal Damji Boricha Assessment Years-2010-11 & 2011-12 infirmities in the documents submitted by the assessee and therefore, the impugned additions were not justified. Finally, Ld. CIT(A) restricted the impugned additions to Rs.93,602/- by applying average Gross Profit Rate of preceding two years. Aggrieved, the revenue is in further appeal before us.
The Ld. Departmental Representative [DR] drew our attention to the fact that Ld. CIT(A) erred in providing substantial relief to the assessee since the assessee could not substantiate the delivery of material with cogent material. Per Contra, Ld. AR placed reliance on the stand of Ld. CIT(A) to contend that additions were made merely on the basis of mere conjecture or surmises and the adverse material was never confronted to the assessee. On the other hand, the assessee provided sufficient documentary evidences to substantiate the purchases and therefore, the order of first appellate authority was quite reasonable.
We have heard the rival contentions and perused the relevant material on record. After perusal of the same, we find that the submissions of the assessee as well as revenue stand on equal footing. The assessee although submitted purchases invoices, bank statements & ledger extracts but could not file any confirmation from any of the alleged bogus supplier and also could not substantiate the delivery of material by producing transport receipts etc. Further, all the concerns were being run by single person who upon oath admitted to have entered into providing accommodation entries against commission which cast serious doubts on assessee’s claim. On the other hand, Ld. AO did not confront the assessee with adverse material in violation of principle ITA.No.113 & 114/Mum/2016 Binal Damji Boricha Assessment Years-2010-11 & 2011-12 of natural justice. Moreover, no attempt was made to test the genuineness of the transactions by resorting to powers granted u/s 133(6).
Therefore, on the totality of facts and circumstances, we deem it fit to restore the matter back to the file of Ld. AO for adjudication de novo with proper appreciation of facts and after providing adequate opportunity of being heard to the assessee, who in turn, is directed to substantiate the purchases with cogent material including demonstration of actual delivery of material and other evidences. Resultantly, revenue’s appeal stands allowed for statistical purposes.
The assessee in AY 2011-12, on similar lines, has suffered addition on account of bogus purchases for Rs.2,38,02,109/-. The same has been deleted altogether by Ld. CIT(A) against which the revenue is in further appeal before us. The facts and circumstances being identical, taking same stand, this matter is also restored back to the file of Ld. AO on similar lines.
Resultantly, both the appeals filed by the revenue stands allowed for statistical purposes. Order pronounced in the open court on 08th November, 2017.