DEEPAK C. BAJAJ,MUMBAI vs. ITO 2(1) KALYAN, KALYAN

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ITA 2938/MUM/2016Status: DisposedITAT Mumbai31 August 2017AY 2010-114 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal followed its previous decisions in the assessee's own cases for other assessment years and restricted the addition to 12.5% of the alleged bogus purchases.

What were the facts?

The assessee, engaged in trading lubricating oil and grease, made purchases from certain dealers who later provided accommodation bills without supplying goods. The AO disallowed the entire purchase amount, and the CIT(A) restricted it to 25%.

What were the issues?

The primary issue was the extent to which purchases from alleged hawala dealers should be disallowed when the assessee failed to provide complete supporting documentation.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148,Section 142(1),Section 69

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “I”, BENCH, MUMBAI

Before: SHRI RAJENDRA, AM & SHRI RAM LAL NEGI, JM

For Respondent: Shri Saurabh Kumar Rai (DR)
Hearing: 01/08/2017Pronounced: 31/08/2017

सुनर्ाई की तारीख / Date of Hearing : 01/08/2017 घोषणा की तारीख/Date of Pronouncement: 31/08/2017 आदेश / O R D E R

PER RAM LAL NEGI, JM

1.

The present appeal has been filed by the assessee against order dated 04/01/2016 passed by the Ld. Commissioner of Income Tax (Appeals)-3, Thane, pertaining to the assessment year 2010-11, whereby the Ld. CIT (A) has partly allowed the appeal filed by the assessee against assessment order dated 30/10/2014 passed u/s 143 (3) r/w section 147 of the Income Tax Act, 1961 (for short ‘the Act’).

2.

Brief facts of the case are that the assessee a proprietary concern, M/s DNR Corporation, engaged in the business of trading in lubricating oil and Grease, filed its return of income for the assessment year 2010-11 declaring the total income of Rs. 5,43,791/-. The same was processed u/s 143 (1). Subsequently, the revenue received the information from the Sales Tax Department, Maharashtra that certain dealers had provided accommodation bills to different purchasers including the assessee in this case without actually supplying goods. On verification, it came to the notice that assessee had purchased goods from the said dealers to the tune of Rs. 70,66,771/- during the financial year relevant to the assessment year 2010-11. Accordingly, the AO issued notice u/s 148 after recording reasons. In response thereof the assessee requested to treat the original return of income as the return of income filed in response to notice u/s 148. Thereafter, the AO issued notice us/ 143 (2) a notice u/s 142 (1) along with questionnaire. The assessee furnished copies of bills and payments details. Since, the assessee had not maintained stock register and failed to produce transport challans, notices u/s 143 (6) were issued to the parties concerned, however, the notices were received back un-served. The Ward Inspector also could not locate the parties. Accordingly, the AO disallowed the entire amount of purchase and added the same to the income of the assessee. In first appeal, the Ld. CIT (A) restricted the disallowance to 25% of the purchases made from the hawala dealers holding that there cannot be sale without any purchase.

3.

Still aggrieved, the assessee has challenged the impugned order on the following effective ground:-.

1. “The Ld. Commissioner of Income Tax (Appeals)-III, Thane [hereinafter referred to as “ Ld. CIT (A)’] erred in passing the order dated 04-01-2016 disallowance @ 25% of Rs. 7066771/- works out @ Rs. 1766692/- are retained & relief is partly given @ Rs. 5300079/- in place of full Rs. 7066771/-. The Appellant prays that additions of Rs. 7066771 made u/s 69 of I.T. Act by I.T.O. Ward 2(1) at Kalyan on a/c of so called hawala purchases be deleted.”

4.

At the outset, the Ld. counsel for the assessee submitted that the assessee’s case is covered by the decision of ITAT, Mumbai rendered in assesse’s own case for the A.Y. 2009-10 and 2011-12 and the Tribunal has restricted the addition to the extent of 12.5%. The Ld. counsel further submitted that the present appeal may be decided accordingly.

5.

On the other hand, the Ld. Departmental Representative (DR) relying on the findings of the Ld. CIT (A) submitted that the impugned order does not warrant any interference as the disallowance of 25% is reasonable in the light of the facts of the case and the evidence on record.

6.

We have heard the rival submissions and also perused the material on record. We find that the SMC Bench of the Mumbai Tribunal has restricted the addition to the extent of 12.5% of the alleged bogus purchases, in assessee’s own appeals, (A.Y. 2009-10 ) and ITA No. 284/Mum/ 2017 (A.Y. 2011-12). The operative part of the order reads as under:-

“5 Having heard rival submissions, I am of the view that the rate of GP of 25% estimated by the assessee is on the higher side, since the assessee is a wholesale trader and in the wholesale trading, GP rate of 25% is unlikely. I notice that the addition is being sustained by the Tribunal in some of the cases @ 12.5%. Accordingly I am of the view that the G.P rate may be adopted at the above said rate and the same would meet the ends of justice. Accordingly I modify the order passed by Ld CIT (A) in both the years and direct the AO to sustain the addition to the extent of 12.5% of the alleged bogus purchases. I order accordingly.”

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