ACIT Vs Rashmikant V. Shah (ITAT Mumbai)
The issue under consideration is whether the CIT is correct in restricting the disallowance u/s 69C against bogus purchase at rate of 12.5% of the bogus purchases?
ITAT states that, in the facts and the circumstances of the case, the total purchases shown to be made from the parties cannot be held to be entirely bogus. It needs to be appreciated that in order to achieve the reported sales/turnover, there must be some corresponding purchases, whether effected from the alleged entry providers or from the grey market without bills. Thus, there ought to be some purchases made and hence, entire disallowance is not justified. In this regard, the ratio laid down by the Hon’ble Bombay High Court in the case of CIT v. NikunjEximp Enterprises (P.) Ltd., is quite relevant. The CIT(A) has also gone through the case and restricted the bogus purchase to the extent of 12.5% . However, at the time of argument, the Ld. Representative of the assessee has no objection to restrict the addition to the extent of 12.5% of the bogus purchase. Anyhow, on seeing the facts and circumstances, it seems quite justifiable to restrict the addition to the extent of 12.5% of the bogus purchase. ITAT nowhere found any illegality and infirmity in the order passed by CIT(A) in question. Taking into account all the facts and circumstances, ITAT are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, all these issues are decided in favour of the assessee against the revenue.
FULL TEXT OF THE ITAT JUDGEMENT
The revenue has filed the present appeal against the order dated 08.10.2018 passed by the Commissioner of Income Tax (Appeals) -25, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009-10.
2. The revenue has raised the following grounds: –
“(i) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.62, 792/- made by the Assessing Officer on account of bogus purchases, without appreciating the fact that the assessee had failed to produce bills, vouchers and other documentary evidences in support of his claim and without considering the latest Apex Court decision in the case of N.K. Protiens Ltd. wherein it is held that once it is proved that the purchases are bogus then addition should be made on entire purchases and not on profit element embedded in such purchases.
(ii) On the facts and circumstances of case and in law, the Ld. CIT(A) erred in estimating the profit from Hawala purchases by disallowing only Rs.24,672/- being 12.5% of the bogus purchases as even the basic onus of producing delivery challans, transport bills etc. were not fulfilled by the assessee.
(iii) The appellant prays that the order of the CJT(A) on the above grounds be reversed and that of the Assessing Officer be restored.
(iv) The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.“
3. The brief facts of the case are that the assessee filed his return of income on 29.09.2009 declaring total income to the tune at Rs.30,73,760/-. The return was processed u/s 143(1) of the I.T. Act, 1961. Thereafter, the case of the assessee was reopened after recording the reasons and according notice u/s 148 of the Act dated 13.03.2014 was issued and served upon the assessee. In pursuance of the notice, the assessee filed the return of income which he had already filed. Thereafter, notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The assessee is engaged in the business of Trading in Chemicals. The case of the assessee was reopened on the basis of an information received from the DGIT(In.) Mumbai in which it was conveyed that the assessee has taken the bogus purchase entries from the following 2 parties in sum of Rs.1,97,383/- which is hereby as under: –
