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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: Shri Saktijit Dey & Shri G Manjunatha
O R D E R Per G Manjunatha, AM : This appeal filed by the assessee is directed against the order of the CIT(A)-33, Mumbai dated 72-04-2016 and it pertains to AY 2009-10. The assessee raised the following grounds:-
(1) On the facts and in law, learned CIT(A)-33 has erred in confirming of jurisdiction of the assessing officer to initiate proceedings u/s 147 / 148 for assessment year 2009-10. (2) On the facts and in law, learned CIT(A)-33 has erred in sustenance / confirmation of addition made by AO to the extent to Rs.18,58,158/-.”
The Brief facts of the case are that the assessee is an individual, filed his return of income for the A.Y. 2009-10 on 26-05-2009 declaring total income of Rs. 3,28,290/-. The return was processed u/s 143(1) of the I.T.
Act, 1961. The assessing officer noted that the list of assesses, who were involved in bogus purchase activity by taking accommodation entries from hawala operators included the name of assessee. As per the information the assessee has taken bogus purchase bills from 13 parties mentioned on page 2 of the assessment order totaling Rs.74,32,632. Those 13 parties, on oath have stated that they have given only bills and no actual transaction had taken place between them and the assessee company.
In the light of the information received from the DGIT (Inv), the assessing officer reopened the assessment by issuing notice u/s 148 of the Act. In response to notice u/s 148, the assessee has filed return and returned the same income as had been returned in the return originally filed. The assessing officer, during the course of re-assessment proceedings, issued notices u/s 133(6) to those 13 parties; however, many of the notices were returned back and in some cases though notices served, but no reply was received. These facts were confronted to the AR of the assessee. The assessee explained that the purchases shown by them were genuine as the payments for the purchases have been done through account payee cheque. The assessing officer, was not satisfied with the explanation. He observed that payment by account payee cheque was not sacrosanct and was not sufficient to establish the genuineness of the purchases. For this proposition he relied upon the judgement of Hon’ble Apex Court in the case of Kachwal Gems V/s JCIT (2007) 288 ITR 10 (SC). In this view of the matter, the AO held the entire alleged bogus purchases of Rs.74,32,632 debited to the P&L Account as unexplained expenditure and accordingly added the same to the total income declared by the assessee. Aggrieved, assessee carried the matter before CIT(A).
The Ld.CIT(A), has dismissed the legal ground challenging the reopening raised by the assessee by following the judgment of Hon’ble Supreme Court in the case of ACIT vs Jhaveri Stock Brokers P. Ltd 291 ITR 500 (SC) and by observing that the AO has reopened the assessment by following the due procedure. On merits, the Ld.CIT(A), for the detailed reasons mentioned in his order, has held that profit element involved in such bogus purchases can only be added and, therefore, relying upon the judgement of Vijay Proteins Ltd vs CIT 58 ITD 428, confirmed disallowance of 25% on such alleged bogus purchases thereby an addition of Rs.18,58,158 was retained and the remaining addition of Rs.55,74,474 was deleted. Still aggrieved, the assessee is in appeal before us.
We have heard the parties and perused material available on record.
With regard to ground No.1 pertaining the validity of the re-assessment u/s 147 was not pressed before us. Accordingly, ground 1 is rejected, as not pressed. 4. With regard to ground 2 pertaining to confirmation of addition of Rs.18,58,158 we find that the issue of addition on account of alleged bogus purchases by obtaining bogus purchase bills has been considered and decided in a plethora of cases and the Tribunal has been consistently holding a view that only profit element involved in such purchases can only be added. The Tribunal, in the case of Shri Vijay N Mehta in vide order dated 21 June,2017 has upheld estimation of profit of 15% on alleged bogus purchases(wherein one of us was a party to the order. Therefore, consistent with our earlier view and also considering the facts of present case, we direct the assessing officer to estimate profit of 12.5% on alleged bogus purchases of Rs.74,32,632 and make the addition of the same to the returned income. This ground of appeal is partly allowed.
5. In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 27th September, 2017.