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Facts
The Assessing Officer (AO) reopened the case of the assessee based on information that the assessee had accepted bogus purchase bills from accommodation entry providers. The AO disallowed 15% of the total amount of these bogus purchases, amounting to Rs. 14,77,989, treating it as unexplained income.
Held
The CIT(A) had reduced the addition to 5% of the impugned bogus purchases, relying on a previous ITAT decision for the same assessee for AY 2009-10. The Tribunal, in its decision, stated that a 12.5% profit rate was on the higher side and directed the AO to recompute the income after applying a profit rate of 5%.
Key Issues
Whether the disallowance of bogus purchases should be restricted to 5% of the total amount as held by the CIT(A) and supported by previous ITAT decisions, or if the AO's initial disallowance of 15% was justified.
Sections Cited
Sec. 147, Sec. 148, Sec. 133(6), Sec. 145(3)
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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI KULDIP SINGH & SHRI AMARJIT SINGH
O R D E R Per Amarjit Singh (AM): This e-appeal filed by the revenue is directed against the order passed by the ld. CIT(A) for A.Y. 2010-191. The assessee has raised the following grounds before us: “1. On the facts and circumstances of the case and in law, the learned CIT(A) erred in facts and in law by giving partial relief to the assessee by reducing the addition / disallowance to 5% of the impugned non-genuine / bogus purchases as against the addition / disallowance @12.5% made by the Assessing Officer by relying on.
2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in facts and in law by reducing the disallowance @ 5% of the impugned bogus purchases by relying on the judgment dated 06 02 2019 of the jurisdictional ITAT in the case of the this assessee for the A.Y 2009- 10 which was not accepted by the Revenue and further appeal was filed It is submitted in this regard that in the said ITAT judgment on identical facts it was held by Hon'ble Tribunal that disallowance @12.5% was at higher rale going by the nature of business of the assessee (trading in various products of iron & steel) and also for the reason that the assessee has also paid VAT element on the impugned bogus purchases without P a g e | ITO-42(1)(4) Vs. Ravindra G. Chitalia appreciating the fact that one of the case laws relied upon by the A.O for 12.5% disallowance was based on the judgment of the Hon'ble Gujarat High Court in the case of Shri Simit P Seth (2013)38 Taxmann.com385(Guj) wherein the subject matter of impugned bogus purchases was also related to steel. Besides, no iota of evidence to the effect that the impugned bogus purchases made included any VAT element was brought on record as held by the Hon'ble ITAT.
3. On the facts and circumstances of the case, the Hon'ble ITAT is requested to entertain this appeal though the tax effect is below the monetary limit prescribed in the CBDT circular no. 17/2019 dated 08.08.2019 r.w. Circular No. 3/2018 dated 11.07.2018 as amended on 20.08.2018 as the case falls in the exception provided in para 10(e) of the said circular in as much as the addition is based on information received from external sources in the nature of law enforcement agencies, namely, Sales Tax Authorities
4. The appellant craves to leave to amend or alter any ground or add a new ground.”
Fact in brief is that assessee has filed return of income declaring total income of Rs.263,647/- on 14.10.2010. The return of income was processed u/s 143(1) of the Act. Subsequently, information was received from the sale tax department through DGIT(Inv.) Mumbai that some parties had indulged in the acceptance of bogus purchase bills from the accommodation entry providers. As per the information received the assessee was beneficiary of such bogus purchase bills and during the financial year relevant to assessment year under consideration assessee had accepted bogus bills from the following parties:
P a g e | ITO-42(1)(4) Vs. Ravindra G. Chitalia Therefore, the assessing officer reopened the case within the meaning of Sec. 147 of the Act by issuing of notice u/s 148 of the Act on 15.10.2014. In response the assessee has filed copies of purchase bills in respect of above mentioned parties along with copies of bank statement. The AO has not agreed with the submission of the assessee and stated that the aforesaid parties mentioned in this orders have accepted in their statement that they have not done any business and also not made any delivery of goods to the purchasing parties. Further AO mentioned that notices issued u/s 133(6) of the Act were return unserved. In view of the above facts the assessing officer reached to the conclusion that the assessee was a beneficiary of the accommodation bills issued by the aforesaid parties without making any delivery of goods. The assessing officer also rejected the books of account for the year under consideration by invoking provision of Sec. 145(3) of the Act. The AO further stated that assessee could not produced the party, stock register delivery challan, lorry receipt, transport detail etc. therefore, 15% of the total amount of Rs.98,53,257/- which comes to Rs.14,7,989/- was added to the total income of the assessee by treating the same as unexplained.
The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) after perusing the order of ITAT passed in the assessee’s own case for assessment year 2009-10 on similar issue and identical fact has restricted the above @ 5% as against 15% of the alleged purchases.
Heard both the sides and perused the material on record. Without reiterating the facts as elaborated above we find that similar issue on identical fact in the case of the assessee has been adjudicated by the ITAT and restricted the addition after applying profit rate @ 5%. With the assistance of ld. representative we have perused the decision of ITAT as referred above. The relevant extract of the decision is reproduced as under: