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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: SHRI P.K. BANSAL (VP) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the assessee against order dated 16/11/2015 passed by the Ld. Commissioner of Income Tax (Appeals)-10, Mumbai, for the assessment year 2010-11, whereby the Ld. CIT (A) has partly allowed the appeal filed by the assessee against assessment order passed u/s 143(3) of the Income Tax Act, 1961 (for short ‘the Act’).
Brief facts of the case are that assessee engaged in bright steel bars and alloy steels etc., filed in return of income for the assessment year under consideration declaring total income of Rs.17,03,183/-. The case was selected for scrutiny and notices u/s 143(2) and 142(1) were issued. In response thereof, the authorized representative of the assessee appeared and submitted the details called for.
2 Assessment Year: 2010-11
Since, the assessee had made purchases from various parties during the year relevant to the assessment year under consideration amounting to Rs. 1,54,64,243/-, notices calling for information u/s 133(6) were issued to some of the suppliers in order to verify the genuineness of the purchases in question. Out of the total 12 notices issued, 9 notices received back un-served and no response received in response to 3 notices served. The assessee also failed to produce the suppliers or filing confirmations. As per statement recorded by the Sales Tax Department Maharashtra, the said suppliers were identified as hawala traders. The assessee was accordingly asked to show cause as to why the entire purchases should not be treated as non-genuine purchase and why the entire amount should not be the total income? Since, the assessee failed to produce any documentary evidence to establish the genuineness of the purchases in question, AO added the amount in question to the income of the assessee and determined the total income of the assessee at Rs. 1,71,67,430/-.
In the first appeal the Ld. CIT(A) restricted the addition to 12.5% of the total amount of bogus purchases determined by the AO. Still aggrieved, the assessee is in appeal before the Tribunal.
The assessee has preferred this appeal against the impugned order passed by the Ld. CIT(A) on the following effective ground:-
The Learned Commissioner of Income Tax (Appeals)-10 has erred in Law in confirming the addition @ 12.5% of Genuine Purchases made by Assessee of Rs. 20665577/-, i.e. Rs. 2583197/-.
This case was fixed for hearing for 02.08.2017. When the case was called for hearing, neither the assessee nor any authorized representative of the assessee appeared. We noticed that on the last date of hearing also the assessee had not appeared. From the conduct of the assessee we are satisfied that the assessee 3 Assessment Year: 2010-11 is no longer interested in pursuing its appeal. We accordingly, decided to dispose of the appeal on the basis of material on record, after hearing the departmental representative (DR). We accordingly asked the Ld. DR to argue the case on behalf of the revenue.
Before us, the Ld. DR submitted that the Ld.CIT (A) has wrongly restricted the addition to 12.5% of the total bogus purchases made by the assessee during the relevant year. Since, the assessee has failed to prove genuineness of the transaction, the Ld. CIT(A) ought to have confirmed the addition made by the AO.
We have perused the entire record and also gone through the cases relied upon by the authorities below. The only grievance of the assessee is that the Ld. CIT (A) has wrongly sustained the addition to 12.5% of the total amount of bogus purchases made by the assessee. The Ld. CIT(A) has restricted the addition holding as under:
4.2.2 in the instant case, no doubt, the AO has made efforts to examine the so-called suppliers by issuing notices u/s133(6) but could not succeed since such parties were not available and the given/revised address. Therefore, the AO was prevented by a reasonable cause from giving an opportunity to the appellant to cross examine the outcome of his enquiry. The appellant has also utterly failed to produce those parties before the AO and the evidence for transport of the material. With regard to the information received from DIT(Inv.), Mumbai the summary of the communication was already made known to the appellant during the assessment proceedings as a result the appellant has filed certain details from time to time before the AO. Even though the AO could not prove substantively that the amounts given to the sellers in cheque from have come back to the appellant, the activities of accommodation entries in the trading community is not unheard of. Further investigations carried out by the Sales Tax Department, another Government Agency, with regard to VAT violation 4 Assessment Year: 2010-11 cannot be lost sight of. Even though thereafter catena of cases by the jurisdictional ITAT which have decided the issue in favour of the assessee, the decisions are not uniform in all these cases as they were decided as per the facts and circumstances of that particular case before them. I am of the opinion that the facts and circumstances of the present case are more akin to the case decided by the Hon’ble Gujarat High Court in the case of Sumit P Seth (supra). Respectfully following the decision, I hereby direct the AO to work out 12.5% of the so-called bogus purchases from the above 14 parties on the amount of Rs.2,06,65,577/-, and added back the same to the taxable income in place of the disallowance of the entire purchases from those 14 parties. The ground is partly allowed.
We notice that the AO has not rejected the books of account and accepted the sales shown by the assessee. Since, the AO has not rejected the sales during the relevant year, the entire amount of purchases cannot be added of the income of the assessee as there cannot be sale without purchase. If the assessee did not purchase the goods in question from the parties concerned, it implies that purchases were made from the parties other than those mentioned in the books of account. Hence, there is no justification in making addition of the entire amount of bogus purchases determined by the AO. Under these circumstances, the AO ought to have made addition keeping in view the profit element embedded in the purchases in question.