INCOME-TAX OFFICER vs. JITENDRA RAVINDRA MALPURE, NASHIK

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ITA 2478/PUN/2016Status: DisposedITAT Pune23 March 2018AY 2010-114 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 upheld the CIT(A)'s order, finding it fair and reasonable. While transactions were established with evidence of goods trail and payment, a 25% disallowance was deemed appropriate to account for potential purchases from the open market.

What were the facts?

The Revenue appealed the deletion of additions made for alleged bogus purchases. The Assessing Officer (AO) treated purchases worth Rs. 19,26,253/- as bogus. The CIT(A) restricted the disallowance to 25% of the purchases, considering them inflated rather than entirely bogus.

What were the issues?

Whether the CIT(A) was justified in restricting the disallowance of purchases to 25% when the AO had treated them as entirely bogus. The genuineness of purchases from parties who could not be produced or responded to.

Which sections of the Income-tax Act were involved?

Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SMC BENCH, PUNE

Before: SHRI D. KARUNAKARA RAO, AM

For Appellant: Shri Ajay Modi, JCIT
For Respondent: Shri Sanket Joshi &, Shri Pranav Shende
Hearing: 13.03.2018Pronounced: 23.03.2018

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This is the appeal filed by the Revenue against the order of CIT(A)- 1, Nashik, dated 19-08-2016 for the Assessment Year 2010-11.

2.

Grounds raised by the Revenue are as under : “1. Whether on the facts and in the circumstances of the case, the Learned CIT(A)-1, Nashik was justified in deleting the addition of Rs.19,26,253/- for A.Y.2010-11 on account of alleged bogus purchases from Hawala dealers/parties. 2. Whether on the facts and in the circumstances of the case, the Learned CIT(A)-1, Nashik was justified in deleting the purchases treated as bogus when the appellant had not been able to produce the certain parties from whom purchases were made when letters sent to the parties were returned undelivered or the parties did not respond? 3. Whether the Learned CIT(A)-1, Nashik erred in assuming that the purchases were only inflated when it was clear from the conduct of the assessee, the parties found missing and results of the investigation of another Govt. Department (Sales Tax), that the purchases could not be

proved as genuine and therefore the disallowance by the AO was justified?

4.

Whether the Learned CIT(A)-1, Nashik erred in presuming that simply because no addition was made in the case of Sales, it was accepted as genuine and further assuming that thereby purchases should be genuine?

5.

Whether the Learned CIT(A)-1, Nashik erred in accepting the affidavits from suppliers without any explanation from the assessee why the suppliers could not appear before the AO when they were called for examination?

6.

The appellant prays that the order of the Learned CIT(A)-1, Nashik may please be cancelled and the order of Assessing officer may please be restored.

7.

The appellant prays to adduce such further evidence to substantiate his case.

8.

The appellant prays leave to add, alter, clarify, amend and or withdraw any grounds of appeal as and when the occasion demands.”

3.

Briefly stated relevant facts are that assessee is an individual and

is engaged in the business of manufacturing of trading in electrical

goods. Assessee filed the return of income on 29-09-2010 declaring

total income of Rs.6,76,940/- for the assessment year under

consideration. On the basis of information received from the

Investigation Section of Sales Tax Department, AO issued notices

u/s.148 of the Act to the assessee. AO found that assessee made

purchases from the following parties. Details are given below :

Name of the party Amount of alleged bogus purchases Bharat Enterprises 1,17,265/- Kushal Impex 17,035/- Aroma Industries 45,007/- Leo Impex 5,53,540/- Laxmi Enterprises 11,27,608/- Picasso Mercantile 37,461/- Company Pvt. Ltd. Asian Impex (India) 28,337/

Eventually, AO came to the conclusion that the purchases made by the

assessee are bogus ones and determined the income at Rs.26,03,190/-.

4.

In the First Appellate Proceedings, CIT(A) after elaborately

discussing various case laws came to the conclusion that this is not a

case of bogus purchases but a case of inflated purchases and at best

from bogus parties. Therefore, AO is directed to restrict the

disallowance of purchases to 25% of purchases made by the assessee

for the year under consideration. The operational para No.4.88.3 of the

order of CIT(A) is extracted here as under :

“4.88.3 Thus, in my opinion the facts on record demonstrate that this is not a case of bogus purchase but a case of inflated purchases and at best from bogus parties. The appellant has purchased goods of A.Y. 2010-11 – Rs.19,26,253/- and A.Y. 2011-12 - Rs.63,43,426/-. Considering the facts and circumstances of the case, the AO is directed to restrict the disallowance to 25% of purchases for A.Y. 2010-11 – Rs.4,81,563/- & A.Y. 2011-12 of Rs.15,85,856/-.”

5.

Aggrieved with the order of CIT(A) the Revenue filed the present

appeal before the Tribunal with the grounds extracted above.

6.

Ld. DR for the Revenue relied on the orders of AO strongly and

submitted for confirming the entire addition of Rs.19,26,253/- instead

of restricting to 25% of the said purchases.

7.

On the other hand, Ld. Counsel for the assessee relied on the

order of CIT(A). He submitted that it is a case where assessee

successively demonstrated the trail of goods and payment of

consideration for purchase of the goods. In such cases, the disallowance

is uncalled for merely on his failure to produce the parties before the

authorities.

8.

I heard both the sides and perused the orders of the Revenue.

The only issue under consideration is against restriction of addition to

25% by the CIT(A). Revenue desires confirming of 100% of the addition

made by the AO. This is a case where infact the assessee is not in

appeal against the order of CIT(A) restricting the addition to 25%of the

purchases. On considering the fact that the assessee furnished

relevant documents in respect of the trail of goods from the place of

purchase to the assessee’s premises by virtue of copies of bills, ledger

account extracts, bank account extracts etc., in my view, the fact of

transaction of purchase of goods and the trail of them stands

established. However, in order to block any leakage of gross profit,

where the goods may have been purchased from open market, I find the

order of the CIT(A) is fair and reasonable and does not call for any

interference. Accordingly, the grounds raised by the Revenue are

dismissed.

9.

In the result, appeal of the Revenue is dismissed.

Order pronounced on this 23rd day of March, 2018.

Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 23rd March, 2018. Satish

आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Nashik 3. आयकर आयु� / The CIT-1, Nashik 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / 5. DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार

स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

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