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Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI
Before: SHRI D.T. GARASIA & SHRI MANOJ KUMAR AGGARWAL
Per D.T. Garasia, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 22.02.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11.
The short facts of the case are as under:
The assessee had filed the return of income on 04.08.2010 for the assessment year under consideration. The case was reopened and assessment was completed under section 143 read with section 147 of the Income Tax Act. During the course of assessment proceedings, the Assessing Officer (hereinafter referred to as AO) found that assessee has made purchase from one M/s. MR. Corporation of Rs.3,33,289/-. The assessee was given show cause notice and assessee replied that assessee has accounted purchases in his books of accounts and he has also admitted the same while filing the half
2 Shri Vinod Kumar Bhawarlal Kawad yearly return with Sales Tax Department. The Sales Tax Department had issued a notice to the assessee stating that M/s. MR. Corporation has not paid the taxes in respect of the purchases made from it and assessee had paid Rs.19,624/- towards the VAT, penalty and interest thereon. The assessee had made full payment to M/s. MR. Corporation for purchase of licenses. The ledger extract of M/s. MR. Corporation along with purchase invoices were enclosed towards the proof for purchase of licenses and payment made thereof. The licenses purchased from the above party have been sold by the assessee to various clients and sale proceed has duly been accounted in the books of the assessee. After considering the reply, the AO was of a view that assessee has made purchases from an unregistered dealer i.e. M/s. MR. Corporation and the assessee is identified as one of the accommodation beneficiaries of M/s. MR. Corporation. Therefore, purchases made by the assessee are not genuine. Hence, the expenses claimed Rs.3,33,289/- towards purchase of licenses from an unregistered dealer is rejected.
Matter carried to Ld. CIT(A) and the Ld. CIT(A) has also dismissed the appeal of the assessee.
During the course of hearing, the Ld. A.R. submitted before us that assessee had made purchases from M/s. MR. Corporation. He submitted the copy of purchase bill, bill number, suppliers’ name, address, total amount of VAT in the bill, bank statement showing the payment to this party by account payee cheque, stock statement and ledger account of the assessee. Therefore, this proves that assessee has made purchases from this party. Nowhere the sales have been doubted. The Sales Tax Department found that the said party was bogus party and assessee is a beneficiary. The Ld. A.R. submitted that the assessee has made the expenditure and the payments have been made and assessee has made a genuine purchase.
We have heard the rival contentions of both the parties. Looking to the facts and circumstances of the case, it is admitted fact on record that assessee has made purchases from M/s. MR. Corporation. Assessee has purchased the licenses from M/s. MR. Corporation and M/s. MR. Corporation has not paid the sales tax and VAT. Therefore, assessee has paid Rs.19,624/- for VAT, penalty and interest thereof. The assessee made full payment of Rs.3,33,289/- to M/s. MR. Corporation towards purchase of licenses and the licenses purchased from the above party have been sold by the assessee to various clients and sale proceed has duly been accounted in the books of the assessee. From the above facts, we are of the view that the only benefit assessee got is 4% of the VAT by purchasing the licenses from M/s. MR. Corporation. Therefore, entire addition cannot be made. Therefore, we modify the order of lower authorities and direct the AO to make the addition of only 4% of total purchase i.e. Rs.3,33,289/- which comes to Rs.13,332/-.
In the result, appeal is partly allowed.
Order pronounced in the open court on 17.05.2017.