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Facts
The assessee, an individual engaged in the steel resale business, filed his return of income for Assessment Year 2011-12. Information from the sales tax department indicated the assessee was involved with hawala dealers for purchases. The Assessing Officer (AO) reopened the assessment and added the entire purchase amount of ₹1,33,15,904/- under Section 69C for unexplained expenditure. The CIT(A) restricted this addition to 20% of the bogus purchases.
Held
The Tribunal noted that the AO had information about bogus purchases from seven parties. The assessee failed to substantiate the genuineness of these purchases, and notices to the suppliers were not responded to. The Tribunal acknowledged that while the AO made a 100% addition, similar cases and judicial precedents allowed for additions to cover the profit element of unproved purchases, generally at 20%.
Key Issues
Whether the addition on account of unexplained expenditure on bogus purchases should be restricted to 20% of the total bogus purchase amount, as held by the CIT(A), or the full amount as originally assessed by the AO.
Sections Cited
69C, 143(1), 144, 147, 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI SANDEEP SINGH KARHAIL, JM
These are the two appeals filed by the income tax officer – 41 (2) (1), Mumbai (the learned AO) in case of one assessee for two different assessment years involving similar issues and therefore those are dealt with by this common order.
For AY 2011 – 12 in ITA number 2689/M/2023 the appeal is filed by the learned assessing officer against the appellate order passed by the learned CIT – A wherein the appeal filed by the assessee against the assessment order passed by the learned assessing officer was partly allowed.
“1. Whether on the facts and in the circumstances of the case and in law, the learned CIT (A) has erred in confirming only 20% of the addition made on account unexplained expenditure incurred on purchases corresponding to bogus purchases debited in books of account as against of 100% of the amount of bogus purchase made by the Assessing Officer.
2. Whether on the facts and in the circumstances of the case and in law, the learned CIT (A) has erred in confirming only 20% of the addition made on account of unexplained expenditure incurred on purchases corresponding to bogus purchases ignoring the facts that the assessee could not counter to the statements of the hawala dealers provided to him during the assessment proceedings nor wa the assessee able to prove the genuineness of the purchases debited in the books of account either by providing the suppliers for examination or by producing the suppliers for examination or by furnishing others substantiating documents such as delivery challans, lorry receipts, mode of transport, good receiving note etc. to prove the genuineness of the transaction.
Whether on the facts and in the circumstances of the case and in law, the learned CIT (A) has erred in confirming only 20% of the addition made on account of unexplained expenditure incurred on purchase corresponding to bogus purchases ignoring
4. Whether on the facts and in the circumstances of the case and in law the learned CIT (A) was justified in restricting the addition on account of purchases from the bogus parties to 20% of bogus purchase ignoring the findings of the Hon'ble Gujarat High Court in the case of N.K. Protein Ltd. Vs. DCIT against which the SLP was dismissed by Hon'ble SC 2017 84 taxmann.com 195)
In ITA number 2691/M/2023 for assessment year 2010 – 11 similar grounds of appeal are raised.
Brief facts of the case shows that for assessment year 2011 – 12, assessee an individual, engaged in the business of reseller in steel, filed return of income on 23/9/2011 declaring a total income of ₹ 590,930/–. This return of income was processed under section 143 (1) of the act. Subsequently the information was received from the office of the Director General Of Income Tax (investigation) Mumbai about assessee being involved in taking purchase bills from the hawala dealers listed by the Maharashtra sales tax department. Therefore, the case was reopened by issue of notice under section 148 of the income tax act on 18th/8/2014. The assessee was asked
The assessee aggrieved with the above assessment order preferred an appeal before the learned CIT – A i.e. National Faceless Appeal Centre, Delhi who passed appellate order on 2/6/202. Before him the reopening of the assessment was challenged along with the addition under section 69C of ₹ 13,315,904/–. The learned CIT – A noted that during the faceless appellate proceedings
The learned CIT – A confirmed the reopening of the assessment by relying on several judicial precedents of the honourable High Court.
With respect to the merits of the addition, It was noted that there are seven parties from whom the assessee has purchased goods of ₹ 13,315,904/– were reported as the hawala dealers as per the sales tax Department which information has been communicated to the assessing officer. It was noted that in assessee's own case for assessment year 2009 – 10 similar addition has been made by the assessing officer on account of bogus purchases wherein the learned CIT – A has directed the AO to restrict the addition following the several decisions of the coordinate benches to the extent of 20% of the amount of bogus purchases to cover the profit element relatable to the unproved purchases.
Thus in nutshell, the learned CIT – A deleted 100 % of the addition made under section 69C of the act of bogus purchases of ₹ 13,315,904/– but retained the addition to the extent of 20% thereof. By this appellate order the learned assessing officer is aggrieved and is in appeal before us.
The learned departmental representative vehemently supported the order of the learned assessing officer stating that the learned CIT – A has without any reason restricted the addition to the extent of only 20% when the assessing officer has made an addition to the extent of hundred percent. He submits that the assessee has failed to prove the genuineness of the purchases. Even the 133 (6) notices sent to the respective sellers have also not been honoured. Therefore, the order of the learned CIT – A suffers from the basic defect of deciding the issue without any cogent reason.
We have carefully considered the rival contention and perused the orders of the lower authorities. We find that the facts clearly shows that the learned assessing officer had a specific information is position with regard to the bogus purchases shown from the seven entities by the assessee amounting to ₹ 13,315,904/–. These purchases have been shown by the assessee in his business of reseller in Ireland and steel under the proprietary name of M/s Maharashtra metals. During the course of assessment proceedings the assessee could not substantiate the genuineness of the purchases and further the notice is sent by the learned assessing officer under section 133 (6) of the act were also not responded by the suppliers. With respect to each of the parties the sales tax department
ITA number 2691/M/2023 is filed by the learned assessing officer for assessment year 2000 – 11 against the order of the learned CIT – A i.e. national faceless appeal Centre dated 2/6/2023 raising identical grounds of appeal as were raised in assessment year 2011 – 12.
14. The fact shows that the assessee filed its return of income on 25/9/2010 declaring total income of ₹ 463,970/–. This return was processed under section 143 (1) of the act. Subsequently the information was received that the assessee has purchased goods from five different parties, which are stated to be the bogus hawala dealers as per the Maharashtra since tax department. This information has travelled to the learned assessing officer from the sales tax department through the director-general of income tax (investigation), Mumbai. During this year the assessee has purchased goods of ₹ 7,211,443/–. During the course of assessment proceedings the assessee was asked several details about these purchases along with the stock register etc. The assessee failed to furnish the details. Therefore the assessment order under section 144
15. Assessee approached the learned CIT – A who based on the order for assessment year 2011 – 12 and 2009 – 10, confirmed the reopening of the assessment but restricted the addition to the extent of 20% of the bogus purchases following the decision of the coordinate bench in several cases as well as his own order for assessment year 2009 – 10.
16. On hearing the learned DR, perusal of the assessment at the appellate order, we find that identical issue is involved in the appeal of the assessee for assessment year 2011 – 12 wherein we have upheld the order of the learned CIT – A restricting the addition to the extent of 20% of the bogus purchases. There is no distinguishing feature is pointed out by the learned departmental representative in this case. Therefore, for the similar reasons given by us in deciding the appeal of the assessee for assessment year 2011 – 12 we do not find any reason to deviate from the
We find that while filing the appeal by the learned assessing officer for assessment year 2010 – 11 even the assessment year is also not clearly mentioned, it is just mentioned "2010". Based on the assessment order, appellate order we have been filed that the appeal pertains to assessment year 2010 – 11. We expect the learned assessing officer at least to mention the assessment year correctly. We hope that necessary care would be exercised now onwards.
In the result, both the appeals filed by the learned assessing officer are dismissed.
Order pronounced in the open court on 22.03.2024.