SHREE DILIPKUMAR B JAIN,MUMBAI vs. ITO 29(1)(3), MUMBAI

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ITA 1027/MUM/2017Status: DisposedITAT Mumbai16 October 2017AY 2009-103 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal reduced the disallowance on bogus purchases from 20% to 12.5% of the alleged amount. It confirmed the CIT(A)'s decision to sustain a 15% disallowance on expenses that might include a personal element.

What were the facts?

The assessee's assessment was reopened due to information about bogus purchases from dealers who issued fake bills. The Assessing Officer disallowed 20% of alleged bogus purchases, which was confirmed by the CIT(A). The assessee also faced disallowance on personal expenses, which was restricted to 15% by the CIT(A).

What were the issues?

Whether the disallowance on bogus purchases and personal expenses were justified and reasonable.

Which sections of the Income-tax Act were involved?

Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” Bench, Mumbai

Before: Shri B.R. Baskaran (AM)

For Respondent: Ms. N. Hemalatha
Hearing: 16.10.2017Pronounced: 16.10.2017

The appeal filed by the assessee is directed against the order dated 1.12.2016 passed by the learned CIT(A)-40, Mumbai and it relates to A.Y. 2009-10. The assessee is aggrieved by the decision of the learned CIT(A) in confirming the addition relating to bogus purchases and also in partially confirming the addition relating to personal expenses.

2.

I heard the parties and perused the record. The Assessing Officer reopened the assessment upon receiving information that the assessee has made purchases from certain dealers, who were found to be indulging in issuing bogus bills without actually supplying the materials. During the course of assessment proceedings, the Assessing Officer issued notices u/s. 133(6) of the Act to those suppliers, but he did not receive any reply and in some cases, the notices were returned back un-served. The assessee also did not furnish details of transport receipts, octroi payment details and other evidences to substantiate the genuineness of the purchases. Accordingly, the Assessing

2 Shri Dilipkumar B. Jain Officer disallowed 20% of the alleged bogus purchases and the same was confirmed by the learned CIT(A).

3.

Learned AR submitted that the assessee is dealing in chemical products and gross profit declared is around 5% only. Accordingly, she submitted that the disallowance made at the rate of 20% is very much on the higher side. Learned AR submitted that the assessee has reconciled purchases and sales also.

4.

On the contrary, learned Departmental Representative supported the order passed by the learned CIT(A).

5.

Having heard the rival submissions, I am of the view that the disallowance made out of alleged bogus purchase @ 20% appears to be on higher side. I also noticed that the assessee has been declaring gross profit rate of around 5% only. Learned AR submitted that the assessee has reconciled purchases and sale. Considering all these facts, I am of the view that addition should be sustained to the extent of 12.5% of the value of alleged bogus purchases in order to take care of possible revenue leakages and the same would meet the ends of justice. Accordingly, I modify the order passed by the learned CIT(A) and direct the Assessing Officer to sustain the addition to the extent of 12.5% of the value of alleged bogus purchases.

6.

Next issue relates to disallowance of expenses. The Assessing Officer made disallowance out of various expenses on adhoc basis. Disallowance of expenses relating to conveyance, depreciation of car, interest on car loan, motorcycle expenses, petrol expenses, travelling and telephone expenses, were made @ 40% on the reasoning that these expenses might include personal expenses also. The learned CIT(A) deleted the disallowance made under other heads but restricted the disallowance made from the above said expenses to the extent of 15% as against 40% made by the Assessing Officer. The assessee is still aggrieved.

3 Shri Dilipkumar B. Jain

7.

I heard parties and perused the record. I noticed that the learned CIT(A) has deleted the disallowance made out of other expenses and restricted the disallowance to 15% as against 40% made by the Assessing Officer out of conveyance, depreciation of car, interest on car loan, motorcycle expenses, petrol expenses, travelling and telephone expenses. I noticed that the Assessing Officer had made disallowance mainly on the reasoning that personal element involved in incurring these expenses cannot be ruled out. Before me, the assessee could not furnish any material to contradict the view taken by the AO. All these expenses generally involve personal element. I also agree with the view taken by Ld CIT(A) that disallowance @ 40% is on the higher side. Hence, on a conspectus of the matter, I am of the view that the disallowance sustained by Ld CIT(A) @ 15% on the above said expenses is reasonable. Accordingly, I confirm the order passed by the learned CIT(A) on this issue.

8.

In the result, appeal filed by the assessee is partly allowed. Order has been pronounced in the Court on 16.10.2017.

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