What did the Tribunal hold?

The Tribunal found that the purchases were indeed bogus. However, instead of disallowing the entire amount, it directed the AO to disallow a reasonable profit rate of 12.5% on these bogus purchases.

The assessee claimed purchases of Rs. 9,44,941/- from certain parties. The Assessing Officer (AO) received information from the sales tax department suggesting these purchases were bogus.

What were the issues?

The primary issue was whether the entire amount of purchases from alleged hawala parties should be disallowed, or if a partial disallowance based on a profit margin was appropriate.

Renova Engraving Systems P.Ltd vs ACIT | ITAT Mumbai 2017

Income Tax Appellate Tribunal, “E” BENCH, MUMBAI

For Appellant: Shri Naveen Gupta, DR

For Respondent: Shri Naveen Gupta, DR

Renova Engraving Systems P. Asst. Commissioner of Income Tax, Ltd OSD- 9 31 Valmiki Co. operative Mumbai Housing Mithanaar Rd, Vs. Kandarpada, Dahisar (W) Mumbai- PAN No. AADCR0142A Appellant .. Respondent .. Shri Shailesh Parmar. AR Assessee by Revenue by .. Shri Naveen Gupta, DR .. Date of hearing 03-05-2017 Date of pronouncement .. 12-05-2017 O R D E R PER MAHAVIR SINGH, JM:

This appeal by the assessee is arising out of the order of CIT(A)-21 Mumbai, in appeal No. CIT(A)-21/ACIT-13(3)(1)/IT-189/2014-15, Mumbai dated 31-11-2015. The Assessment was framed by ACIT OSD-9, Mumbai for the A.Y. 2009-10 vide order dated 30-10-2014 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).

The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in disallowing the entire bogus purchases of Rs. 9,44,941/-.

We have heard the rival contentions and gone through the facts and circumstances of the case. Brief facts are that the assessee is engaged in manufacturing i.e. engraving/ engraving of printing cylinders. During the course of assessment proceedings, the AO received information from sales tax department Govt. of Maharashtra through Director General of Income Tax

Renova Engraving Systems P. Ltd.; A.Y:09-10 Investigation Mumbai that the assessee has made bogus purchase of Rs. 9,44,941/- during the year under consideration from the following parties: -

Sl Name of Concern PAN FY Amount (Rs.) No 1. Asian Steel AWZPS2908L 2008-09 1,27,021/- 2. Pancham Industrial - 2008-09 60,669/- Corporation 3. Maulik Enterprises BMCPS0117D 2008-09 7,57,251/- Total 9,44,941/-

The assessee before AO as well as before CIT(A) and even now before us claimed that purchase are supported by invoices, delivery challans, payments are made by account payee cheques and stock register is also maintained. According to the learned Counsel for the assessee these items purchased from the above parties are consumed like MS Cylinder, MS Pipeline supply MS Seemelss pipe etc. The learned Counsel also claimed that GP in this year is much higher at 32% as against the GP on earlier years at 15 to 16%. Alternatively, the learned Counsel for the assessee submitted that although the purchases are not bogus but a reasonable profit rate can be applied to the above purchase. On the other hand, the learned Sr. DR supported the orders of the lower authorities.

We find that the assessee has made the bogus purchases of Rs. 9,44,941/- 5. from the hawala parties as per the report of Maharashtra Sales Tax, who informed the DGIT(Investigation) Mumbai about these parties. As the alternative contention of the assessee that a profit rate may be applied to the above bogus purchases, we are of the view that a reasonable profit rate of 12.5% be estimated and disallowance to that extent be made. We direct the AO to disallowed 12.5% of bogus purchases and re-compute the income accordingly.

In the result, appeal of assessee is partly allowed. Order pronounced in the open court on 12-05-2017.

RENOVA ENGRAVING SYSTEMS P.LTD,MUMBAI vs. ACIT (OSD) -9, MUMBAI

What did the Tribunal hold?

What were the facts?

What were the issues?

Which sections of the Income-tax Act were involved?

Recent GST High Court judgments