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Income Tax Appellate Tribunal, MUMBAI BENCH “J”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI RAJESH KUMAR, HONBLE
2 5715 & 5716/MUM/2016 ITA NO.6058, 6059 & 6060/MUM/2016 Shri Sujan Singh S. Deora O R D E R PER C.N. PRASAD (JM) 1. These appeals are filed by the assessee and Revenue against the orders of the Learned Commissioner of Income Tax (Appeals)-30, Mumbai dated 29.07.2016 for the Assessment Years 2009-10 and 2010-11 arising out of the Assessment Orders passed u/s. 143(3) and 143(3) r.w.s. 147 of the Act.
In spite of issue of notice none appeared on behalf of the assessee nor any adjournment was sought. Therefore, we proceed to dispose off these appeals on merits by hearing Ld.DR.
Briefly stated the facts are that, based on the information received from the DGIT(Investigation) and Sales Tax Department, Government of Maharashtra, the assessments for the Assessment Years 2009-10 and 2010-11 were completed u/s. 143(3) and 143(3) r.w.s.147 of the Act holding that the assessee availed bogus purchase entries from various parties referred to in Page No.2 of the Assessment Order. In the course of assessment proceedings assessee was required to prove of the genuineness of the purchases made and in response to the same assessee submitted that assessee purchased the materials form the parties for the construction works and without materials he cannot complete the work allotted to him. Payments were made through account
3 5715 & 5716/MUM/2016 ITA NO.6058, 6059 & 6060/MUM/2016 Shri Sujan Singh S. Deora payee cheques and the copies of ledger accounts were submitted. Assessee did not produce inward registers, day to day Stock Register, transportation details of materials etc. The Assessing Officer to verify the genuineness of the purchases issued notices u/s. 133(6) to the parties but the notices have returned unserved with an endorsement that notice were “unclaimed”, “left” or “not found”. Therefore, since the assessee could not produce the Stock Registers and could not prove the movement of goods by way of transport receipts and as the parties were also not produced for verification and no records were furnished for consumption of material he has added the entire purchases made by the assessee from the parties as unproved/bogus purchases.
On appeal Ld.CIT(A) agreed with the Assessing Officer that assessee has failed to prove the genuineness of the purchase transactions from the said parties. However, referring to various judicial pronouncements and taking note of the fact that the Assessing Officer has accepted the sales and without their being any purchases there would not have been any sales, Ld.CIT(A) concluded that only the profit element embedded in the purchases to be brought to tax and restricted the addition/disallowance to 15% of the bogus purchases for these two assessment years. Assessee preferred appeals in sustaining the addition/disallowance to 15% and the Revenue is in appeal in granting
Learned counsel for the Revenue vehemently supported the order of the Assessing Officer in bringing to tax the entire purchases as bogus purchases as the assessee could not prove the genuineness of the purchases for both the Assessment Years 2009-10 and 2010-11.
We have heard the Ld. DR, perused the orders of the authorities below. Ld.CIT(A) restricted the addition/disallowance to 15% of the bogus purchases for these two assessment years. The Hon'ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd [355 ITR 290] held that when the assessee made purchases and sold the finished goods as a natural corollary not the entire amount covered under such purchases would be subject to tax but only the profit element embedded therein. Similar view has been taken by the Hon'ble Gujarat High Court in the case of CIT v. Simit P. Seth [38 taxman.com 385]. Simply because the parties were not produced the entire purchases cannot be added as held by the Bombay High Court in the case of CIT v. Nikunj Eximp [216 Taxman.com 171]. In view of the above decisions and taking the totality of the facts and circumstances into consideration, we restrict the addition to 8% of the alleged purchases instead of 15% estimated by the Ld.CIT(A). Thus, we direct the Assessing Officer to disallow 8% of the purchases treated as
In the result, appeals of the Revenue are dismissed and appeals of the assessee are partly allowed.
Order pronounced in the open court on the 25th October, 2017.