DEPUTY COMMISSIONER OF INCOME TAX, RAIPUR V. MS JAGANNATH ENTERPRISES, RAIPUR

ITA 422/RPR/2024

AI Insights

The case involves the Deputy Commissioner of Income Tax, Raipur as the appellant and Ms Jagannath Enterprises as the respondent. The dispute arose from the reassessment order under sections 147 and 144B of the Income Tax Act, 1961, where the A.O made an addition on account of bogus purchases amounting to Rs. 28,69,505 from M/s Abhishek Enterprise. The Commissioner of Income Tax (Appeals) reduced the addition to Rs. 1,54,170, adopting an estimated profit of 6% on the bogus purchases. The revenue appealed against this reduction. The ITAT, considering a similar case involving the same assessee for a different assessment year, decided to set aside the matter to the A.O to determine the profit element from the bogus purchases by aligning the G.P rate of such purchases with that of other genuine purchases.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 299027 (ITAT-RAIPUR)
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2024
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-10-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 19-09-2024
• Other Referred Cases: Pr. Commissioner of Income Tax-17 Vs. M/s. Mohhomad Haji Adam & Company
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA PATEL
• Assessee Lawyers: R. B. DOSHI
• Keywords: Set aside; Opportunity of being heard; Question of law; Unexplained expenditure; Bogus purchase; Accommodation entries; Bogus
• Section: 147; 250; 68

Judgement Text

"आयकर अपीलीय अिधकरण, रायपुर Ɋायपीठ, रायपुर IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR ŵी रिवश सूद, Ɋाियक सद˟ एवं ŵी अŜण खोड़िपया, लेखा सद˟ क े समƗ । BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM (आयकर अपील सं. / ITA No:422/RPR/2024) (िनधा[रण वष[ Assessment Year: 2018-19) Deputy Commissioner of Income Tax, Raipur V s Ms Jagannath Enterprises, Tatibandh, Raipur PAN: AAMFJ2856M (अपीलाथŎ/Appellant) . . (ŮȑथŎ / Respondent) िनधाŊįरती की ओर से /Assessee by : Shri R. B. Doshi, CA राजˢ की ओर से /Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई की तारीख / Date of Hearing : 25.10.2024 घोषणा की तारीख/Date of Pronouncement : 28.10.2024 आदेश / O R D E R Per Arun Khodpia, AM: The Captioned appeal is filed by the department against the order of Commissioner of Income Tax (Appeal), NFAC, Delhi, (for short, “Ld. CIT”), u/s 250 of the Income Tax Act, 1961 (for short, “The Act”), for the Assessment Year 2018-19, dated 24.07.2024. Resulted, from the order passed by Deputy Commissioner of Income Tax-1(1), Raipur (C.G.), (for short, “The Ld. AO”), u/s 147 r.w.s. 144B of the Act, dated 16.03.2023. 2 ITA No. 422/RPR/2024 DCIT vs Ms Jagannath Enterprises, Raipur 2. The grounds of appeal raised by the department in the present appeal are as under: 1. Whether on the facts and in the circumstances of the case Ld. CIT(A) was justified in restricting the addition to only 6% of such bogus purchase of Rs. 25,69,505/-? 3. The concise facts of the case are that the assessee firm is engaged in the business of trading of M.S. Scrape had filed its return of income for the Ay 2018-19 on 30.09.2018 declaring a total income of Rs. 25,46,150/-. The observed that, as per the information available from the insight portal of the department, during the relevant year, the assessee had made bogus purchase of Rs. 28,69,505/- from M/s Abhishek Enterprise. Accordingly, case was reopened u/s 147, After deliberation in the reopening assessment proceedings, considering the replies of the assessee and finding from the survey proceedings as well as statements of Shri Abhishek Agrawal, Shri Gitesh Agrawal and Shri Rajendra Chawhan that the assessee herein is involved in obtaining the accommodation entries, accordingly an addition u/s 68 r.w.s. 115BBE was made on a/c of bogus purchase/ unexplained expenditure. 4. Aggrieved with the aforesaid addition by the Ld. AO assessee preferred an appeal before the Ld CIT(A), wherein the appeal of the assessee was decided by the Ld CIT(A) after considering the contentions of 3 ITA No. 422/RPR/2024 DCIT vs Ms Jagannath Enterprises, Raipur the assessee that it had made purchase for the goods for which bogus bills were obtained from M/s Abhishek Enterprises from open/grey market, thus, the addition has been scaled down to Rs. 1,54,170/- adopting the estimated profit of Rs. 25,69,505/-, the amount of bogus purchases @6%. 5. Aggrieved with aforesaid relief granted to assessee by the Ld CIT(A), now the revenue is in appeal before us in the present case. 6. At the outset, Shri R. B. Doshi, CA Authorized Representative of the assessee have submitted that the issues raised in the present appeal are squarely covered by the decision of coordinate bench of ITAT, Raipur in the assessee’s own case in ITA No. 357/RPR/2024 for the AY 2019-20 dated 24.09.2024, wherein the identical issues assailed by the revenue was disposed of by the tribunal allowing the appeal of revenue for statistical purposes. The relevant findings in the aforesaid order are extracted hereunder for the sake of clarity: 7. Admittedly, it is a matter of fact borne from record that the assessee firm had failed to substantiate the authenticity of its claim of having made genuine purchases from the aforementioned three supplier parties. At this stage, we may herein observe that as the A.O had received specific information from GST department, as per which, the assessee firm was one of the beneficiaries of bogus purchase bills/fake invoices obtained from the aforementioned parties, therefore, heavy onus was cast upon the assessee firm to dispel the said allegation based on irrefutable documentary evidence. However, we find that the assessee firm had failed to 4 ITA No. 422/RPR/2024 DCIT vs Ms Jagannath Enterprises, Raipur substantiate the authenticity of its claim of having made genuine purchases from the aforementioned parties. 8. Be that as it may, controversy involved in the present appeal before us lies in a narrow compass i.e. the quantification of the profit which the assessee firm would have made by procuring the goods at a discounted value from the open/grey market as against the value booked in its books of account based on purchase bills/invoices of the aforementioned supplier parties. 9. As observed by the CIT(Appeals), and rightly so, as the A.O had not dislodged the sales disclosed by the assessee firm, therefore, there could be no justification on the part of the A.O to have held the entire amount of subject purchases made from the aforementioned parties. We are principally in agreement with the CIT(Appeals), that the addition in the case of the assessee firm is liable to be restricted to the extent of profit element which the assessee firm would have made by procuring the subject goods at a discounted value from the open/grey market as against the value booked in its books of account based on bills/invoices of the subject parties. 10. Apropos the quantification of profit which the assessee would have made by procuring the goods in question from the open/grey market is concerned, we find that the Hon’ble High Court of Bombay in the case of Pr. Commissioner of Income Tax-17 Vs. M/s. Mohhomad Haji Adam & Company, ITA No 1004 of 2016, dated 11.02.2019 while upholding the order of the Tribunal, had observed, that the addition in the hands of the assessee as regards the bogus/unproved purchases was to be made to the extent of bringing the G.P rate of such purchases at the same rate of other genuine purchases. The Hon’ble High Court while concluding as hereinabove had observed as under: “8. In the present case, as noted above, the assessee was a trader of brics. The A.O found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding 5 ITA No. 422/RPR/2024 DCIT vs Ms Jagannath Enterprises, Raipur of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sale declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trade. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd. (supra) cannot be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under- \"So far as the question regarding addition of Rs.3,70,78,125/- as gross profit on sales of Rs.37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66% Therefore, considering 5.66 % of Rs.3,70,78,125/- which comes to Rs.20,98,62 1.88 we think it fit to direct the revenue to add Rs.20,98,621.88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue.\" 9. In these circumstances, no question of law, therefore, arises. All Income Tax Appeals are dismissed, accordingly. No order at costs.\" It was, thus, observed by the Hon’ble High Court that the addition in respect of the purchases which were found to be bogus in the case of the assessee before them, who was a trader, was to be worked out by bringing the G.P. rate of such bogus purchases at the same rate as that of other genuine purchases. On the basis of the aforesaid observations of the Hon’ble High Court, we are of the considered view that on the same lines the profit made by the assessee firm in the case before us by procuring the goods at a discounted value from the open/grey market can safely be determined by bringing the G.P rate of such bogus purchases at the same rate as that of the other genuine purchases. 11. We, thus, in terms of our aforesaid observations restore the matter to the file of the A.O, with a direction to him to restrict the addition in the hands of the assessee qua the impugned bogus/unverified purchases by bringing the GP rate of such bogus purchases at the same rate as that of the other genuine purchases. 12. Before parting, we may herein observe that the Ld. AR had placed on record the details of overall purchase average rates of M.S. Scrap, as under: 6 ITA No. 422/RPR/2024 DCIT vs Ms Jagannath Enterprises, Raipur As the aforesaid details filed by the Ld. AR before us were not there before the lower authorities, therefore, we herein direct the A.O to consider the same in the course of the set-aside proceedings after making necessary verifications to his satisfaction. Be that as it may, the A.O shall quantify the profit element which the assessee firm would have made by procuring the goods in question at a discounted value from open/grey market after considering the judgment of the Hon’ble High Court of Bombay in the case of Pr. Commissioner of Income Tax-17 Vs. M/s. Mohhomad Haji Adam & Company (supra). Needless to say, the A.O shall in the course of set-aside proceedings afford a reasonable opportunity of being heard to the assessee firm. 13. In the result, both the appeals of the revenue and the assessee are allowed for statistical purposes in terms of our aforesaid observations. 7. Ld. CIT-DR on the other hand vehemently supported the order of Ld. AO. 8. After a thoughtful consideration to the facts on record, submissions by the Ld. Authorized Representative of both the sides and the decision of ITAT in the assessee’s own case under similar facts and circumstances, 7 ITA No. 422/RPR/2024 DCIT vs Ms Jagannath Enterprises, Raipur wherein this tribunal has adopted a view to restore the matter back to the file of Ld. AO to quantify the profit element which the assessee firm would have made by procuring the goods in question at a discounted value from open / gray market after considering the judgment of Hon’ble High court of Bombay in the case of PCIT-17 vs M/s Mohhomad Hazi Adam & Company (supra), for which a working of average rate has been furnished by the assessee before us, the same is culled out as under: 9. We, thus, in terms of the view adopted by this tribunal in assessee’s own case (referred to supra) for the AY 2009-10, set aside the matter to the file of Ld. AO to adjudicate the issue under consideration, in terms of our observations hereinabove. Needless to say, in the course of set aside proceedings, the Ld. AO shall afford the assessee, reasonable opportunity of being heard. 8 ITA No. 422/RPR/2024 DCIT vs Ms Jagannath Enterprises, Raipur 10. In result, the present appeal of revenue is partly allowed for statistical purposes. Order pronounced in the open court on 28/10/2024. Sd/- (RAVISH SOOD) Sd/- (ARUN KHODPIA) Ɋाियक सद˟ / JUDICIAL MEMBER लेखा सद˟ / ACCOUNTANT MEMBER रायपुर/Raipur; िदनांक Dated 28/10/2024 Vaibhav Shrivastav आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : // स×याǒपत Ĥित True copy // आदेशानुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीलीय अिधकरण, रायपुर/ITAT, Raipur 1. अपीलाथŎ / The Appellant- 2. ŮȑथŎ / The Respondent- 3. आयकर आयुƅ(अपील) / The CIT(A), 4. The Pr. CIT, Raipur (C.G.) 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur 6. गाडŊ फाईल / Guard file. "