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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, JM & SHRI RAJESH KUMAR, AM
सुनवाई की तायीख / Date of Hearing : 13.9.2017 घोषणा की तायीख /Date of Pronouncement : 29.9.2017 आदेश / O R D E R PER BENCH :
The assessee has filed four appeals. Out of which 1.9.2016 passed by the ld.CIT(A) for the assessment year 2009-10. and 1495/M/2016 is filed against the order of CIT(A) dated 16.12.2015 for the assessment year 2010-11 and ITA No.6773/M/2016 filed against the order of CIT(A) dated 1.9.2016. The revenue has also filed appeal No.1004/Mum/2016 against the order of ld.CIT(A) dated 16.12.2015 wherein the assessee has 3 ITA No.1494,1004,1495 6772 and 6773/M/2016 and –CO.142/Mu/2017 also filed CO no.142/Mum/2017.All these appeals, cross-appeals and cross-objection were clubbed together, heard together and are being disposed of by this common order, for the sake of convenience. ITA No. 1495/Mum/2016 Assessment Year 2010-11
At the out set, the ld.AR submitted that though in the grounds of appeal
the assessee has taken the issue of re-opening of the assessment but now he do not wants to press the same. Accordingly, we dismiss this ground.
3. The sole issue raised by the assessee is against the confirmation of Rs.6,01,430/- being 10% of bogus purchases of Rs.60,14,350/- by ld. CIT(A) as against the 100% addition made by the AO u/s 69C of the Income Tax Act, 1961.
4. Facts of the case are the assessee filed return of income on 26.9.2010 declaring total income of Rs.29,15,432 under the normal provisions of Act and Rs.25,65,442/- under the provisions of section 115JB of the Act. The case was scrutinized and the assessment was framed vide order dated 27.12.2012 assessing the total income at Rs.29,65,430/- u/s 143(3) of the Act. Thereafter ,the assessment was reopened and the AO issued notice u/s 148 on 26.3.2013 after receiving information from the DGIT(Inv) who in turn was informed by Sales Tax Department, Government of Maharashtra that the assessee has made bogus purchases to the tune of Rs.60,14,350/-from hawala parties without 4 6772 and 6773/M/2016 and –CO.142/Mu/2017 actual delivery of goods. During the assessment proceedings, the assessee was called upon to prove the genuineness of purchases from M/s Darshan Enterprises amounting to Rs.2,87,406/- and M/s Chemi-Age-Enterprise amounting to Rs.57,26,944/-. The AO also conducted independent inquiries by issuing notices u/s 133(6) of the Act to these parties which were returned unserved. The assessee during the course of assessment proceedings submitted before the AO that the purchases were duly supported with bills and vouchers and payment were made by account payee cheques. It was also submitted that the stock register was duly maintained recording all the purchases and sales. The AO was not satisfied with the submissions of the assessee , the books of account and the record produced by the assessee during the course of assessment proceedings and came to the conclusion that the purchases made from hawala dealers were not genuine and accordingly added the amount of Rs.60,14,350/- to the total income of the assessee by framing the assessment u/s 143(3) vide assessment order dated 28.3.2014 assessing the total income of the assessee at Rs.1,00,16,980/-. In the appellate proceedings, the CIT(A) partly allowed the appeal of the assessee by sustaining the addition to the extent of 10% of the bogus purchases after considering the various submissions and contentions as raised by the assessee during the hearing before him vide para 5.22 of the appellate order which is reproduced below:
5 6772 and 6773/M/2016 and –CO.142/Mu/2017 “5.22. The rejection of book results is affirmed since the impugned purchases could not be proved to be genuine. The cross examination cannot be provided since the impugned parties are not produced by the appellant. In fact theappellant has confirmed in the appellate proceedings that there are no purchases from these parties in the subsequent years. The disallowance has not been made only on the basis of information on the Mahavat website. It is clear that the AO has held the claim of expenses as bogus and therefore not allowable u/s 37(1). He has also considered that purchases may have been made from undisclosed sources of income but not from the impugned parties to whom payments have been made from accounted sources of income. Therefore. in fact and circumstances of the case. in this particular case, it is considered most appropriate to adopt 10% profit which can take care of the rotation of capital utilised for such transact-en. Hence in the light of finding of the Hon'ble Guiarat High Court in the case of CIT vs. Simit P. Sheth. 10.0% profit is found to be appropriate for ascertainment of taxable income related to such transaction. Thus, accordingly Rs.6.01,430/- (10.0% of Rs.60,14,350/-) is sustained and rest of addition of Rs.54,12,920/- is deleted”
We have heard the rival contentions and perused the material placed before us including the case law relied upon by the assessee. We find that in this case, the assessee was found to be a beneficiary of hawala transactions to the tune of Rs.60,14,350/-from two parties mentioned above, the AO added the entire amount of bogus purchases to the total income of the assessee and the assessee could not prove the genuineness of the purchases from the concerned parties by producing the necessary documentary evidences. The notices issued to the parties u/s 133(6) were returned unserved. The ld.CIT(A) deleted the addition to the extent of 90%of the bogus purchases. We further noticed that the AO during the assessment proceedings accepted the sales which were made out of the 6 6772 and 6773/M/2016 and –CO.142/Mu/2017 hawala purchases. In a case where the assessee obtains bogus bills, the purchase are generally made from grey market and the assessee saves in the form of non payment of VAT and other incidental levies. In our opinion, the addition has be made on percentage basis in order to cover the leakages of revenue in such cases which the ld. CIT(A) has rightly done. Therefore, we are of the considered opinion the order passed by the ld.CIT(A) sustaining the addition to the extent of 10% of bogus purchases to rcover the revenue leakages is correct and needed to be upheld. We, therefore, inclined to confirm the order of CIT(A) by dismissing the appeal of the assessee. ITA No.1004/Mum/2016 Since we have already decided the issue in ITA No 1495/Mum/2016 6. against the assessee by upholding decision of the FAA, the appeal by the revenue becomes infructuous and hence dismissed.
Since we have dismissed the revenue’s appeal in ITA No. 1004?Mum/2016 , the cross-objection filed by the assessee thereto becomes infructuous and hence dismissed.
The issue raised by the assessee in this appeal is against the confirmation of the levy of penalty of Rs.25000/- u/s 271A of the Act by CIT(A) as imposed by the AO in respect of default committed u/s 44A of the Act by the assessee.
Facts being the same as in so we are not repeating the same here. The AO issued notice u/s 274 r.w.s 271A of the Act on 28.3.2014 to the assessee calling upon the assessee as to why the penalty should not be imposed for non compliance of provisions of section 44AA of the Act. Thereafter another notice was issued on 28.3.2014. The assessee replied the said notice vide letter dated 3.5.2014 by submitting that the proceedings u/s 271A of the Act were wrongly initiated as there has been no default on the part of the assessee under the provisions of section 145 of the Act. Therefore the provisions of section 271A were not applicable to the assessee as the assessee was maintaining the regular books of accounts which were duly audited by the Auditors of the company. However, the reply of the assessee did not find favour with the AO and he levied penalty by holding that the assessee has committed default without reasonable cause vide order dated 29.9.2014 passed u/s 271A of the Act. In the appellate proceedings, the ld. CIT(A) upheld the order of AO by observing and holding as under :
8 6772 and 6773/M/2016 and –CO.142/Mu/2017 “5. The AO has rejected the books of accounts. The penalty is leviable for the failure of assess to keep, maintain or retain books of accounts, documents etc which enable the assessing officer to compute the income in accordance with the provisions of the IT Act (s.44A). This has not been maintained constraining he AO to reject books of accounts. The penalty levied is therefore upheld and appeal is dismissed.”
We have heard the rival contentions and perused the material placed before us including the case law relied upon by the assessee. We find that in this case, the assessee has maintained regular books of accounts which were audited by the auditors of the company and audit report has also been filed before the authorities below. The provisions of section 271A of the Act deals with the case where the books of account are not maintained or a person failed to maintain the books of account and records as required by the provisions of section 145A of the Act or rules there under. However, in the present case, The assessee has maintained the books of accounts which were also subjected to audit and the audit report was also filed before the lower authorities. The books of accounts were rejected during the assessment proceedings only because of bogus purchases of Rs.60,14,350/- by the assessee undisclosed profit in bogus purchases of Rs.7,51,794/-. The ld. AR also submitted before us that the conclusion and findings of the FAA that the assessee has failed to maintain the books of account in accordance with the provisions of section 44AA were incorrect and contrary to the facts on records. In the present 9 6772 and 6773/M/2016 and –CO.142/Mu/2017 case, we find that the auditor of the company have not made any adverse comments on the books of account maintained by the assessee and duly certified the books ofthe assessee. Under these circumstances, we are not in agreement with the conclusion drawn by the ld.CIT(A) that the penalty u/s 271A is rightly imposed by the AO. In view of the facts and circumstances of the case, we hold that the ld.CIT(A) has wrongly upheld the order of the AO. Therefore, we set aside the same and direct the AO to delete the penalty. Resultantly the appeal of the assessee is allowed. ITA No.6772 and 6773/Mum/2016 11. The issue raised in these appeals are identical to that of ITA No.1495/Mum/2016 except figures. In the said appeal the CIT(A) has sustained the addition to the extent of 10% of the bogus purchases and we have dismissed the appeal of the assessee challenging the order of CIT(A) in ITA No 1495/Mum/2016. Since we have dismissed the appeal of the assessee by upholding the order of CIT(A), the decision taken therein would, mutatis mutandi ,apply to these appeals as well. Resultantly the additions in these appeals are deleted to the extent of 90% of the bogus purchases. Resultantly, the appeals by the assessee are partly allowed. 12. Resultantly, the appeal No.1495/Mum/2016 of the assessee is dismissed. Appeal No.1004/Mum/2016 of revenue and CO of assessee