ITO WARD 3(2), KALYAN, KALYAN vs. LAXMAN MADHABHAI BHUT, DOMBIVALI

PDF · subscribers
ITA 3049/MUM/2023Status: HeardITAT Mumbai21 March 2024AY 2011-12Bench: SHRI AMIT SHUKLA (Judicial Member), SHRI S RIFAUR RAHMAN (Accountant Member)4 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the AO's addition of the entire purchase amount was unjustified. It reasoned that if purchases are debited in books and quantities are recorded, it cannot be considered outside the books. The Tribunal applied the principle of estimating a GP rate of 12.5% as reasonable in cases of suspected hawala dealers.

What were the facts?

The Revenue appealed against the CIT(A)'s decision to restrict the disallowance of purchases to 12.5% instead of the entire amount. The AO had added the full purchase amount of Rs. 20,81,724/- on the grounds that notices to the suppliers were returned unserved.

What were the issues?

Whether the entire purchase amount is to be disallowed when suppliers are not confirmed, or if a reasonable GP rate estimation is appropriate. The validity of disallowing entire purchases based on unserved notices to suppliers.

Which sections of the Income-tax Act were involved?

Section 69C,Section 147,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘SMC‘

For Respondent: Shri R.R. Makwana
Hearing: 21/03/2024Pronounced: 21/03/2024

आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the Revenue against order dated 19/06/2023 passed by NFAC, Delhi for the quantum of assessment passed u/s. 143(3) for the A.Y.2011-12.

Laxman Madhabhai Bhut 2. In the grounds of appeal

1.

, the Revenue has challenged the action of the ld. CIT(A) in restricting the disallowance to 12.5% of the purchases instead of addition made by the ld. AO for the entire purchases of Rs.20,81,724/-.

3. None appeared on behalf of the assessee.

4. The facts in brief are that assessee had filed his return of income on 29/09/2011 declaring total income of Rs.2,82,640/- and the said return was processed u/s.143(1). Subsequently, based on information from DGIT (Inv.) that the Sales Tax Department, Mumbai has unearthed a racket involving various auditors involved in issuing purchases. Based on this information, the assessee’s case has been reopened u/.147. The assessee had shown purchases for a sums aggregating to Rs. 20,81,724/- from various parties. The ld. AO has made the addition on the ground that notice u/s. 133(6) sent to various parties and it was returned unserved. Accordingly, he added the entire amount of Rs.20,81,724/- u/s.69C.

5. The ld. CIT (A) has restricted the addition while estimating the GP rate of 12.5% on the total bogus purchases from various parties.

6. After hearing the ld. DR and on perusal of the impugned order, we find that AO has made addition on account of entire purchases which is wholly unjustified, because once the source of purchases have been debited in the books of accounts and corresponding quantity of material purchased had been recorded in the books and corresponding quantity of Laxman Madhabhai Bhut sales has also been accepted then, it cannot be held that purchases are outside books.

7. At the most, it could be the case of purchases made from hawala dealers for inflating the cost and suppressing GP rate. If parties have not confirmed the transaction then in such a case the principle laid down by the Hon’ble Bombay High Court in the case of PCIT vs. Vishwashakti construction 15 & 20 ITXA 1016 & 1026 of 2018, wherein GP rate of 12.5% has been held to be reasonable in such cases, is applied in the present case also, then CIT (A) is justified. Accordingly, the ground raised by Revenue is dismissed.

8.

In the result, appeal of the Revenue is dismissed.

Order pronounced on 21st March, 2024.

More judgments on Section 69C

All 8,217 judgments and leading authorities on Section 69C →

Recent GST High Court judgments

Search GST case law →