INCOME TAX OFFICER 12(1)(1), MUMBAI, MUMBAI V. ARUDHA TRADERS PRIVATE LIMITED, MUMBAI

ITA 1440/MUM/2024

AI Insights

The case involves appeals by the Revenue against the orders of the CIT(A), which had reduced the addition on account of bogus purchases from 12.5% to 2.5% for the Assessment Years 2014-15 and 2015-16. The Revenue contested the CIT(A)'s decision, arguing that the reduction was unjustified given the involvement of the One World Group and Kapadia Group in bogus transactions. The Tribunal, however, referenced its previous rulings in similar cases involving the same assessee, where it had been decided that the addition should be limited to 2.5%. The Tribunal's decision was influenced by the fact that the Assessing Officer had himself noted the malpractices involved were primarily to evade 10% of the sales tax, and the profit margin in the industry was approximately 2.5%.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 31949 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Other Referred Cases: N. K Proteins Ltd. Vs. DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL SHINDE
• Assessee Lawyers: VINITA SHAH
• Keywords: Bogus purchase; Bogus

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “A” MUMBAI BEFORE SHRI NARENDRA KUMAR CHOUDHRY (JUDICIAL MEMBER) AND SHRI OMKARESHWAR CHIDARA (ACCOUNTANT MEMBER) ITA Nos. 1441 & 1440/MUM/2024 Assessment Year: 2014-15 & 2015-16 Income Tax Officer 12(1)(1), Mumbai Room No.129, Aayakar Bhavan, M. K. Road, Mumbai – 400020 Maharashtra Vs. Arudha Traders Private Limited A-204, Vrindavan Chs Ltd., Near Sai Baba Nagar, Kandivali (West), Mumbai - 400067 PAN NO. AAICA 3317 K Appellant Respondent Assessee by : Ms. Vinita Shah Revenue by : Shri Sunil Shinde, Sr. DR Date of Hearing : 13/11/2024 Date of pronouncement : 07/01/2025 ORDER PER OMKARESHWAR CHIDARA, AM These appeals by the Revenue are directed against two separate orders both dated 29.01.2024 passed by the National Faceless Appeal Centre (NFAC), New Delhi [in short ‘the Ld. CIT(A)’]. 2. The Revenue filed the above captioned appeals with following grounds of appeal 2015-16. i. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) is justified in restricting the addition on account of bogus purchases to the extent of 2.5% of such purchases as against 12.5%, as made by the AO, ignoring the fact that the One World Group and Kapadia Group of entities are involved in bogus sale/purchase transactions without any actual delivery of goods and therefore, the purchases, claimed by the assessee company to have made from the entities of the abovementioned groups, are bogus in nature?. ii. \"Whether on the facts and circumstances of the case in law the Ld.CIT(A) is justified in restricting the addition on account of bogus purchases to the extent of 2.5% of such purchases as against 12.5%, as made by the AO, completely ignoring the judicial rul the jurisdictional Hon’ble ITAT in this regard. 3. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A)/NFAC has erred in not relying on Hon’ble Supreme Court Decision in the case of N. K Proteins Ltd. Vs. DCIT(201 CTR 334 (SC). 3. The main issue on account of bogus purchases should be made @ 12.5% or 2.5%. The Learned DR relied on the Assessment Order and argued that 12.5% of the bogus purchases should be confirm 4. Per contra, the Learned AR of the appellant has submitted that the issue was covered in their favour for the Assessment Years 2016-17 and 2018 1439/Mum/2024, ITA No. 1438 and 1443/Mum/2024 dated 22.8.2024 in their ow addition to 2.5% of the alleged bogus purchases in the peculiar facts and circumstances of the case mentioned in the Assessment Arudha Traders Private Limited ITA Nos. 1441 & 1440 Revenue filed the above captioned appeals with following grounds of appeal for the Assessment Years 2014 i. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) is justified in restricting the addition on account of bogus purchases to the extent of 2.5% of such purchases as against 12.5%, the AO, ignoring the fact that the One World Group and Kapadia Group of entities are involved in bogus sale/purchase transactions without any actual delivery of goods and therefore, the purchases, claimed by the assessee company to have made from the ties of the abovementioned groups, are bogus in nature?. Whether on the facts and circumstances of the case in law the Ld.CIT(A) is justified in restricting the addition on account of bogus purchases to the extent of 2.5% of such purchases as against 12.5%, as made by the AO, completely ignoring the judicial ruling given by the jurisdictional Hon’ble ITAT in this regard. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A)/NFAC has erred in not relying on Hon’ble Supreme Court Decision in the case of N. K Proteins Ltd. Vs. DCIT(201 issue involved in this case is whether the addition on account of bogus purchases should be made @ 12.5% or 2.5%. The Learned DR relied on the Assessment Order and argued that 12.5% of the bogus purchases should be confirmed. the Learned AR of the appellant has submitted that the issue was covered in their favour for the Assessment Years 17 and 2018-19. The ITAT vide orders ITA No. 1439/Mum/2024, ITA No. 1438 and 1443/Mum/2024 dated in their own case held that the AO should restrict the to 2.5% of the alleged bogus purchases in the peculiar facts and circumstances of the case mentioned in the Assessment Arudha Traders Private Limited 2 1441 & 1440/MUM/2024 Revenue filed the above captioned appeals with the Assessment Years 2014-15 and i. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) is justified in restricting the addition on account of bogus purchases to the extent of 2.5% of such purchases as against 12.5%, the AO, ignoring the fact that the One World Group and Kapadia Group of entities are involved in bogus sale/purchase transactions without any actual delivery of goods and therefore, the purchases, claimed by the assessee company to have made from the ties of the abovementioned groups, are bogus in nature?. Whether on the facts and circumstances of the case in law the Ld.CIT(A) is justified in restricting the addition on account of bogus purchases to the extent of 2.5% of such purchases as against 12.5%, ing given by Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A)/NFAC has erred in not relying on Hon’ble Supreme Court Decision in the case of N. K Proteins Ltd. Vs. DCIT(2017) 292 involved in this case is whether the addition on account of bogus purchases should be made @ 12.5% or 2.5%. The Learned DR relied on the Assessment Order and argued that the Learned AR of the appellant has submitted that the issue was covered in their favour for the Assessment Years vide orders ITA No. 1439/Mum/2024, ITA No. 1438 and 1443/Mum/2024 dated n case held that the AO should restrict the to 2.5% of the alleged bogus purchases in the peculiar facts and circumstances of the case mentioned in the Assessment order. The ITAT has directed the AO to restrict the of the bogus purchases because the Learned AO himself recorded that the malpractices 10% of the sales tax and the profit margin in the indust approximately 2.5%. The same facts are mentioned in the order of Ld. CIT(A) also. 5. As the issue is squarely covered in favour of the assessee and other assessment years, respectfully following the orders of the ITAT, the Revenue appeal is dismissed by holding the addition of alleged bogus purchases is to be restricted at 2.5% instea mentioned in the assessment order. 6. Both the above appeal 1441/Mum/2024 and 1440/Mum/2024 a Order pronounced in the open Court on Sd/- (NARENDER KUMAR CHOUDHRY JUDICIAL MEMBER Mumbai; Dated: 07/01/2025 Milan, LDC Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. Arudha Traders Private Limited ITA Nos. 1441 & 1440 order. The ITAT has directed the AO to restrict the addition rchases because the Learned AO himself recorded malpractices of the bogus purchases was only to save the 10% of the sales tax and the profit margin in the indust approximately 2.5%. The same facts are mentioned in the order of As the issue is squarely covered in favour of the assessee and other assessment years, respectfully following the orders of the ITAT, the Revenue appeal is dismissed by holding the addition of alleged bogus purchases is to be restricted at 2.5% instea mentioned in the assessment order. Both the above appeals of the Revenue 1441/Mum/2024 and 1440/Mum/2024 are dismissed Order pronounced in the open Court on 07/01/2025 - NARENDER KUMAR CHOUDHRY) (OMKARESHWAR CHIDARA JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : Arudha Traders Private Limited 3 1441 & 1440/MUM/2024 addition to 2.5% rchases because the Learned AO himself recorded of the bogus purchases was only to save the 10% of the sales tax and the profit margin in the industry is approximately 2.5%. The same facts are mentioned in the order of As the issue is squarely covered in favour of the assessee and other assessment years, respectfully following the orders of the ITAT, the Revenue appeal is dismissed by holding the addition of alleged bogus purchases is to be restricted at 2.5% instead of 12.5% of the Revenue in ITA No. dismissed. /01/2025. Sd/- OMKARESHWAR CHIDARA) ACCOUNTANT MEMBER //True Copy// Arudha Traders Private Limited ITA Nos. 1441 & 1440 BY ORDER, (Assistant Registrar) ITAT, Mumbai Arudha Traders Private Limited 4 1441 & 1440/MUM/2024 BY ORDER, (Assistant Registrar) ITAT, Mumbai "