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Income Tax Appellate Tribunal, “F”, BENCH, MUMBAI
Before: SHRI RAJENDRA, AM & SHRI RAM LAL NEGI, JM
राजस्व की ओर से /Revenue by : Sh. T.A. Khan (DR) यनर्ावररती की ओर से /Assessee by : Sh. Manish J. Sheth (AR) सुनर्ाई की तारीख / Date of Hearing : 14/09/2017 घोषणा की तारीख/Date of Pronouncement: 22/09/2017 आदेश / O R D E R PER RAM LAL NEGI, JM These are the appeal and cross objection filed by the revenue and the assessee respectively, against order dated 29/07/2016 passed by the Ld. Commissioner of Income Tax (Appeals)-20, Mumbai pertaining to the CO No. 206/Mum/2017 Assessment Year: 2011-12 Assessment Year 2011-12, 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 the assessee filed its return of income for the Assessment Year (A.Y.) under consideration declaring the total income of Rs. 29,74,990/-. The return was processed u/s 143 (1) of the Act. Subsequently, the case was selected for scrutiny and the AO issued notices u/s 143 (2) and 142 (1) and in response thereof the authorized representative of the assessee appeared and filed the details called for.
3. On the basis of information received from the Maharashtra Sales Department that certain entities have given bogus bills for purchases to the beneficiaries. It was further revealed that the assessee being one of the such beneficiaries made purchases from nine entities mentioned in the assessment order amounting to Rs. 1,69,33,974/-. Accordingly, the assessee was asked to furnish the confirmation of the parties and establish the genuineness of transaction. In response thereof the assessee inter alia submitted as under:-
“…We therefore request your good self to determine the profit rate @ 7% and difference between the profit and the estimated profit may be added as income. This submission is made with a view to co-operative with the department, to avoid protective litigation, to retain the reputation in the market amongst the suppliers and to buy peace of mind and also to avoid the penal proceedings in the matter.
It is respectfully submitted, that if the entire purchases are treated as bogus the entire amount of such purchases amounting to Rs. 1,62,18,377/- are added in such case the profit rate would be worked out CO No. 206/Mum/2017 Assessment Year: 2011-12 @ 16% which is not practicable and real rate of profit in contractor’s business. We also submit that the payment to suppliers have been made by a/c. payee cheque and there is no evidence or information that these concerns have returned the cash to the assessee. In view of this our submission for rejecting books of accounts and estimating profit rate is quite logical.”
During the course of assessment proceedings, the AO issued notices u/s 133 (6) of the Act to the parties concerned, however, the notices were received back un-served. The AO after hearing the contention of the assessee added back the entire amount of bogus purchases, i.e. Rs. 1,69,33,974/- to the income of the assessee u/s 69C of the Act. In appeal, the Ld. CIT (A) restricted the addition to 11% of the total sales made by the assessee during year relevant to the assessment year under consideration and partly allowed the appeal. The revenue is in appeal against the said order.
The revenue has raised the following effective grounds of appeal against the impugned order passed by the Ld. CIT (A):-
1. “On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in restricting addition of Rs. 1,69,33,974/- made by Assessing Officer on account of accommodation entries obtained by assessee to Rs. 1,28,27,652/- without appreciating that assessee was not able to produce quantitative tally of goods and also failed to submit confirmation and produce parties before Assessing Officer for examination.
2. The appellant prays that the order of the Ld. CIT (A) on the above grounds be set aside and that of the Assessing Officer be restored.” 6. Before us, the Ld. Departmental Representative (DR) relying on the assessment order submitted that the Ld. CIT (A) has erred in restricting the CO No. 206/Mum/2017 Assessment Year: 2011-12 addition to Rs. 1,28,27,652/-from Rs. 1,69,33,947/- by directing the AO to calculate the addition @ 11% of the total sales made by the assessee during the previous year without appreciating that assessee has failed to produce quantitative tally of goods and also failed to submit confirmation and produced the parties before AO for verification.
7. On the other hand, the Ld. counsel for the assessee submitted that the Ld. CIT (A) ought to have sustained the addition to 11% of the alleged bogus purchases instead of 11% of the total turnover amounting to Rs. 11,66,15,016/-. The Ld. counsel further submitted that the assessee has filed the Cross Objection against the findings of the Ld. CIT (A).
We have heard the rival submissions and also perused the material on record. The only grievance of the revenue is that the Ld. CIT (A) has wrongly restricted the addition to Rs. 1,28,27,652/- from Rs. 1,69,33,947/- made by the AO. We notice that the AO has made the addition the entire amount of bogus purchases without rejecting the sales. On the other hand, the Ld. CIT(A) has ordered to restrict the addition to 11% of the total sales including the sale of goods purchased genuinely during the relevant year. In our considered view neither 100% of the amount bogus nor 11% of the entire sales purchases can be added to the income of the assessee.
In Nikunj Enterprises 372 ITR 619 (Bom), the Hon'ble jurisdictional High Court has held that merely because its suppliers had not appeared before the A.O. or the ld. CIT(A) one could not conclude that the purchases were not made by the assessee. The Hon’ble Gujarat High Court in CIT vs. Sumit P. Seth 356 ITR 451 (Guj) has upheld the decision of the Tribunal and sustained the addition of 12.5% of the total bogus purchases holding that only profit element embedded in such purchases can be added to the income of the assessee.
CO No. 206/Mum/2017 Assessment Year: 2011-12
We further notice that the coordinate Bench of the tribunal has already dealt with the identical issue in assessee’s own case & Cross Objection No 53/Mum/for the assessment year 2010-11 and restricted the disallowance to 11% of the amount of bogus purchase computed by the AO or to the peak investment whichever is higher. Hence, in view of the ratio laid down by the Hon’ble High Courts in the cases discussed above, we respectfully follow the decision of coordinate Bench passed in assessee’s own case aforesaid and restrict the addition to 11% of the total amount of bogus purchases determined by the AO in the assessment order. Hence, we modify the order of the Ld. CIT(A) and dismiss the sole ground of the appeal of the renenue. CO No. 206/MUM/2017 (Assessment Year: 2011-12)
The assessee has filed the cross objection against the impugned order on the following effective grounds:
On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in applying 11% of net profit across the total turnover of Rs. 11,66,15,016/-.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) ought to applied 11% on alleged bogus purchase which is Rs. 1,69,33,974/-.” 2. Before us the Ld. counsel for the assessee submitted that there is a delay of 9 days in filing of the present cross objection. and that the delay has been caused because the assessee was not aware of its right to file cross objection and that the present cross objection was filed after appointing a Chartered Accountant as its authorized representative. The Ld. DR opposed the application for condonation of delay. The CO No. 206/Mum/2017 Assessment Year: 2011-12 assessee has given the reason for not filing the objection with limitation in its application, the relevant portion of which reads as under: “The applicant did not have any counsel to advice and guide in the matter and hence, was not aware about right to file cross objection before the Hon’ble ITAT. On 16/08/17/ the appellant appointed a chartered accountant as his AR and as per his advice appellant is filing cross objection and hence it is delayed by 7 days.”
Sub-section 5 of section 253 of the Income Tax Act provides that the Tribunal may admit appeal or permit filing of memorandum of cross- objection of respondent after expiry of relevant period of limitation referred to in sub-section 3 and 4 section 253, if it is satisfied that there was sufficient cause for not presenting it within that period. However, in the present case we are not satisfied that the reason stated by the assessee was sufficient for not presenting the objection within limitation period. Hence, we reject the application for condonation of delay filed by the assessee and dismiss the present cross objection in limine holding as not maintainable being barred by law of limitation.