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Income Tax Appellate Tribunal, MUMBAI BENCHES “I”, MUMBAI
Before: Shri P K Bansal & Shri Pawan Singh
O R D E R Per P K Bansal, Vice-President:
This appeal has been filed by the assessee against the order of the CIT(A) -36, Mumbai, dated 13.06.2016, for A.Y.2010-11. The assessee has raised the following grounds of appeal:
“On the facts and in the circumstances of the case, the learned Commissioner of Income Tax (A) erred in directing the Assessing Officer to make disallowance on account of bogus purchase at the rate 12.5% amounting to ` 33,10,253/-” 2. Brief facts of the case are that the assessee filed its return of income on 04.10.2010 declaring income of ` 5,66,42,717/-. The Assessing Officer noted that the assessee has made purchases to the extent of ` 2,20,56,872/- from the parties, whose names appeal in the list of hawala dealers identified by the Sales Tax Department and the same was put up on the website of the department. There were in all sixteen parties. The Assessing Officer issued notice u/s. 133(6) to these parties but they were returned with the remark ‘Not Known’ except one i.e M/s. Bhumi Enterprise, from whom assessee made purchases to the tune of ` 3,97,800/-. The Assessing Officer treated the sum of ` 2,20,56,872/- as bogus purchases and added it to the income of the assessee. The Assessing Officer also noted sundry creditors outstanding as on 31.03.2010 were M/s. Agni control India ` 85,960/- and M/s. S S Trading Pvt Ltd ` 23,23,125/- related to earlier year. The Assessing Officer issued notice to M/s. S S Trading Pvt Ltd., u/s. 133(6), which returned back. The Assessing Officer therefore further added both these amounts. Addition was also made for ` 7,59,375/- and ` 13,42,650/- in respect of bogus labour charges payable. Thus, total addition of ` 2,65,67,982/- was made. When the matter went before the CIT(A), the CIT(A) restricted the addition to 12.5% of ` 2,64,82,022/- i.e. ` 33,10,253/- in view of the decisions of Hon’ble Gujarat High Court in the cases of CIT vs Simit P Seth 356 ITR 451 and Bholanath Poly Fab Pvt Ltd. 355 ITR 290 and that of Ahmedabad Bench of this Tribunal in the case of Sanket Steel Traders vs. ITO in dated 20.05.2011.
We heard the rival submissions and have gone through the order of the tax authorities below. We noted that in this case the Assessing Officer on the basis of information received from the Sales Tax Department, that the assessee made bogus purchases from various parties amounting to ` 2,20,56,872/-. The assessee was asked to prove the genuineness of the purchases. The assessee contended that all the purchases were genuine but the contention was not accepted by the Assessing Officer. The Assessing Officer also mentioned that the notice issued u/s. 133(6) to these parties were returned unserved by the postal authorities with the remark ‘not known’ or no compliance has been received in response to notice issued. Only the party viz. M/s Bhumi Enterprises, from whom purchases to the tune of ` 3,97,800/- was made, vide letter dated 16.01.2013 denied any transaction with the assessee. The Assessing Officer also noted that certain credit balance outstanding in the books of the assessee as on 31.03.2010, out of that also, the Assessing Officer treated the parties to be bogus and, therefore, made addition in the income of the assessee for bogus purchases from hawala parties at ` 2,20,56,872/- and from other parties of ` 23,23,125/-, ` 7,59,375/- and ` 13,42,650/- The addition in respect of Agni Control India was made u/s. 41(1) amounting to ` 85,960/-. Thus, the total addition ` 2,65,67,982/- was made. When the matter went before the CIT(A), the CIT(A) directed the Assessing Officer to add the income embedded therein only in respect of the sum of ` 2,64,82,022/- @12.5%.
The CIT(A) while holding so relied on the decisions of the Hon’ble Gujarat High Court in the case of CIT vs Simit P Seth and Bholanath Poly Fab Pvt Ltd. (supra).
We have considered the facts of the case independently along with the order of tax authorities below. The learned AR before us vehemently contended that at the most the bogus purchase which were made from the parties, who were on the site of sales tax department were to the extent of `2,20,56,872/- and rest of the parties were the syndicators and are not the parties who are unregistered dealers, where the assessee would have saved the VAT. The Assessing Officer just added the amount of these creditors as notice u/s. 133(6) could not be served on them. Even though the learned AR before us vehemently contended that all the purchases included these parties who were genuine, the assessee has produced copies of purchases bills, all payments have been made through cheques. The Revenue has not given any opportunity to the assessee to cross-examine those parties. The assessee has given address from the purchase bills which related to F.Y.
2009-10, while the notices were issued u/s. 133(6) sometime in 2012. The assessee was not at all confronted. In this regard, if the assessee could have given confirmation in respect of other parties amounting to ` 23,23,125 from S.S.Trading Co. and ` 7,59,375 from S S Trading Pvt. Ltd. The assessee has duly given copy of bank statement and confirmation. Thus, these very parties are very much in existence. Although all these additions are to be deleted, if at all any has to be sustained by the CIT(A) it should have restricted the addition to ` 2,20,56,872/-. On the basis of evidence filed by the assessee, we noted that the assessee has made purchases only to the extent of ` 2,20,56,872/- from the parties, who were in the list of hawala dealers on the website of Maharashtra Sales Tax department. Rest of the parties represent syndicators, part of that relate to the opening balance.
Therefore, if any addition has to be made by the Revenue it should have been made only in respect of ` 2,20,56,872/-. It is not denied by the learned AR that all these parties were unregistered dealer and, therefore, if assessee would have saved from the purchases made from these parties it will be VAT amount. The Hon’ble Bombay High Court in the case of CIT vs. Hariram Bhambhani in ITA 313/2013 decided on 04.12.2015, has held that Revenue cannot bring the entire sales consideration to tax but only the profit attributable on the total unrecorded sales consideration, which alone can be subject to income tax. Since the assessee would have saved VAT, therefore, in our opinion, the CIT(A) has rightly estimated the profit embedded in the purchase @12.5%. But in our opinion, it is only the sum of ` 2,20,56,872/- are bogus purchases for which the assessee has procured bills from unregistered dealers. We, therefore, direct the Assessing Officer to estimate the income @12.5% on the sum of ` 2,20,56,872/- and to that extent we confirm the order of the CIT(A). Thus, the ground taken by the assessee is partly allowed.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 9th day of October, 2017.