Suresh Mehta HUF Vs ITO (ITAT Mumbai)
The issue under consideration is whether the CIT(A) is correct in confirming the addition made by AO for non-genuine and bogus purchases by applying profit rate at the rate of 12.5% of the bogus purchases?
ITAT states that, neither the AO nor CIT(A) has doubted the sales made by assessee out of these bogus purchase. Further, the assessee has produced all the necessary documents in support of purchased transactions such as purchase invoices, purchase register, sales register, stock register, bank statement evidencing payment made by account payee cheque etc. But it is a fact that the assessee could not produce the transportation evidences or expenditure incurred on account of transportation in regard to these purchases. Hence, ITAT is of the view that a reasonable profit can be estimated because the estimation of profit is on higher side. ITAT noted from the assessment order and the order of CIT(A) that both the authorities lower had admitted assessee have made sales which is not denied out of these purchases. It means that the assessee might have purchases from grey market and also saved VAT. Hence, a reasonable profit on these bogus bills can be estimated. Hence, ITAT estimate the profit on these bogus bills at the rate of 5% and direct the AO to recompute the income accordingly. In the Result, the appeals of assessee is allowed.
FULL TEXT OF THE ITAT JUDGEMENT]
These appeals of assessee are arising out of the order of the Commissioner of Income Tax (Appeals)]-29, Mumbai, [in short CIT(A)], in ITA No. CIT(A)-29/IT-215/19(3)(4)/17-18 & CIT(A)-29/IT-214/19(3)(4)/2017-18 dated 31.01.2019. The assessments were framed by the Income Tax Officer, Wad-19(3)(4), Mumbai (in short ACIT/ITO/ AO) for the A.Ys. 2011-12 & 2010-11 vide even date 23.03.2016 under section 143(3) r.w.s 147 of the Income-tax Act, 1961 (hereinafter ‘the Act’).
2. The only issue in these appeals of assessee is against the order of CIT(A) confirming the addition made by AO off non-genuine and bogus purchases by applying profit rate at the rate of 12.5% of the bogus purchases. For this assessee has raised identically worded grounds in both the years i.e. 2010-11 & 2011-12 except the quantum. The facts and circumstances are exactly identical in both the years and hence, we will take the facts from AY 2010-11 and will decide the issue. The grounds raised in AY 2010-11 reads as under: –
“2010-11
1. On the facts and in the circumstances of the case and in law the Hon’ble CIT(A) erred in upholding the assessing officer’s action of reopening of the completed assessment u/ 147 of the IT Act 1961 and the reason assigned for doing so are wrong and contrary to the provision of Income Tax Act and rules made there under.
2. On the facts and in the circumstances of the case and in law the Hon’ble CIT(A) wrongly erred in sustaining GP @ 12.5% of the alleged bogus purchase as unexplained income and he reasons assigned for doing so are wrong and contrary of the provision of Income Tax and rules made there under.”
3. Briefly stated facts are that the assessee engaged in the business of trading. The AO received information from DGIT (Investigation), who in turn received information from Sales Tax Department, Mumbai that the assessee has made purchases from hawala parties, as listed in hawala dealers by the Maharashtra Sales Tax Department who are providing bogus bills of purchase amounting to ₹ 47,08,701/- for AY 2010-11 and ₹ 1,26,15,175/- for AY 2011-12 as admitted by these hawala dealers in their deposition before the authorities. The same reads as under in both the years respectively: –
In AY 2010-11
