ANIL POPATLAL UDESHI,MUMBAI vs. ITO 19(1)(1), MUMBAI

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ITA 40/MUM/2017Status: DisposedITAT Mumbai31 October 2017AY 2009-105 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that since the assessee had fulfilled its onus of making payments by cheque and provided supplier addresses, purchases could not be presumed bogus solely because suppliers were not found. The AO failed to conduct further investigation beyond suspicion.

What were the facts?

The Assessing Officer (AO) disallowed purchases of Rs. 1,93,68,783/- on the grounds that the suppliers were not produced and were allegedly engaged in providing bogus bills. The assessee claimed to have made payments by account payee cheques.

What were the issues?

Whether purchases can be disallowed solely on the non-appearance of suppliers when payments were made by account payee cheques and sales were not disputed.

Which sections of the Income-tax Act were involved?

Section 133(6)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI

Before: SHRI D.T. GARASIA & SHRI MANOJ KUMAR AGGARWAL

For Respondent: Shri Saurabh Deshpande, D.R
Hearing: 21.08.2017Pronounced: 31.10.2017

Per D.T. GARASIA, Judicial Member:

1.

1. The present appeal has been preferred by the assessee against the order dated 20.09.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.

2.

The brief facts of the case are that the assessee is an individual engaged in the business of reseller of Xerox Machine, copier spare parts and Xerox machine parts. During the year the Assessing

Sr. Name of the party Bill amount No. (Rs)

1.

Saileela Trading Pvt. Ltd. 3,00,560/- 2. Sthapna Trade Impex Pvt. Ltd. 6,63,000/- 3. Manav Impex 1,02,69,633/- 4. Riddhi Enterprises 2,97,000/- 5. KC Enterprises 3,93,750/- 6. Pushphar Electricals & Engineers 11,17,125/- Pvt. Ltd. 7. Kameshwar Trading Pvt. Ltd. 19,94,200/- 8. Takshil Trading Pvt. Ltd. 2,34,520/- 9. Pakshal Tradelinks Private Ltd. 4,25,250/- 10. Trichipuram Trading Pvt. Ltd. 8,84,000/- 11. Ramex Trade Impex Pvt. Ltd. 23,39,745/- 12. Jupiter Multitrade Pvt. Ltd. 4,50,000/- Total 1,93,68,783/-

3.

The assessee was asked to produce the above parties for verification. There was no compliance of notice under section 133(6). Therefore, the AO has made the addition on account of bogus purchases of Rs.1,93,68,783/-

4.

Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has allowed the claim by observing as under: “7.12 The facts of the appellant's case are exactly similar to the above case. Respectfully following the above cited decision, and also taking into consideration that the line of business the appellant is i.e. reseller of Xerox machines and copier spare parts & Xerox machine parts where the VAT levied on the goods

3 Shri Anil Popatlal Udeshi purchased itself is ©12.5% which is the benefit the appellant is getting by obtaining the bogus bills and the appellant already offered certain percentage of profit on such purchases and also considering the fact that the AO adopted the same percentage of profit on the total purchases where the Gujarat High Court supported the estimation made in Simith Seth case i.e. 12.5%, the addition of Rs.24,21,098/- made for this assessment year by the AO, @12.5% on the total purchases of Rs.1,93,68,783/-, is confirmed and appeal on this ground is 'dismissed’.”

5.

No one has appeared on behalf of the assessee. Accordingly, we have heard the Ld. D.R. and the Ld. D.R. relied upon the decision of the Tribunal, Ahmedabad Bench in the cases of Shwetambar Steels vs. ITO Ahmedabad and Ganesh Rice Mills vs. CIT (294 ITR 316). The facts in the present case show that assessee could not produce the parties from whom goods are stated to have been purchased. The suppliers were found to be engaged in providing bogus bill without actual dealing of goods. In this regard, the assessee has stated that they had submitted quantitative details of stock with respect of the sales with purchases from the parties during the assessment proceedings. The assessee has submitted the detail of corresponding sales in respect of the purchase from the said parties. As mentioned above the AO has never disputed or examined the aspect of sales receipts. Since the sales made by the assessee was not doubted or disputed by the AO and he has accepted the sales receipts of the assessee as it is, therefore, the AO cannot deny that purchases were not made by the assessee and the material was not used for its sales. What is under dispute is the purchases from the parties from whom bills have been taken and cheques have been issued to them.

4 Shri Anil Popatlal Udeshi Purchases are not in dispute but the parties from whom purchase are shown to have been made are disputed and suspicious. The AO had made the addition as some of the suppliers were declared hawala dealers by the VAT Department. This may be a good reason for making further investigation but the AO did not make any further investigation and merely completed the assessment on suspicion. Once the assessee has brought on record the details of payments by account payee cheque, it was incumbent on the AO to have verified the payment details from the bank of the assessee and also from the bank of the suppliers to verify whether there was any immediate cash withdrawal from their account. No such exercise has been done or findings recorded. There was no detailed investigation made by the AO himself. It is also found that the payments have been made by account payee cheque which are duly reflected in the bank statement of the assessee. There is no evidence to show that the assessee has received cash back from the suppliers. Merely because the suppliers did not appear before the AO or some confirmation letters were not furnished, one cannot conclude that the purchases were not made by the assessee. This view is supported by the decision of Nikunj Eximp Enterprises vs. CIT 216 Taxman 171 (Bom). To this extent, we are of the view that if the assessee has fulfilled its onus of making the payment by cheque and has supplied the addresses of the sellers then it cannot be presumed that supplier were bogus simply because the sellers were not found at the given address. There is a considerable time gap between the period of purchase transaction and period of 5 Shri Anil Popatlal Udeshi scrutiny proceedings. The AO has not brought any material on record to show that there is suppression of sales. It is basic rule of accountancy as well as of taxation laws that profit from business cannot be ascertained without deducting cost of purchase from sales. Estimation of profit ranging from 12.5% to 15% has been upheld by the Hon'ble Gujarat High Court in the case of CIT vs Simit P Sheth 356 ITR 451 (Guj.). Hence, we find no infirmity in the order of the Ld. CIT(A) and accordingly we have no alternative except to endorse the order of the Ld. CIT(A).

6.

In the result, assessee’s appeal is dismissed.

Order pronounced in the open court on 31.10.2017.

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