ATUL J SHAH, MUMBAI V. INCOME TAX OFFICER 19(1)(2) , MUMBAI

ITA 112/MUM/2023

AI Insights

The case involves Atul J. Shah, the appellant, who is engaged in trading ferrous and non-ferrous metals. The Income Tax Officer (ITO) reopened the assessment for the years 2010-11 and 2011-12, alleging that the appellant had obtained bogus purchase bills from hawala operators. The ITO added 25% and 12.5% of the alleged bogus purchases to the appellant's income for the respective years. The Commissioner of Income Tax (Appeals) (CIT(A)) reduced the addition to 12.5% for the year 2010-11. The appellant contested these additions, arguing that the sales declared were accepted by the Department and that a lower percentage of disallowance for bogus purchases should be applied. The Department defended the additions, citing the appellant's failure to prove the genuineness of the purchases. The Tribunal, considering the general G.P range in the appellant's trade, modified the CIT(A)'s order and reduced the addition to 7.5%.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136053 (ITAT-undefined)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: Mumbai
• Next Hearing Date: 22-03-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 12-01-2023
• Other Referred Cases: PCIT vs. Paramshakhti Distributors Pvt. Ltd. in Income Tax Appeal No.413 of 2017 decided on 15/07/2019 by Hon'ble Bombay High Court
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Accommodation entries
• Section: 143(1)

Judgement Text

म ु ंबई ठ “ ए ”,म ु ंबई , ए ं ए . !" हम न, ेख े म' IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “ A ”, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER& SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ं.112/म ु ं/2023 ( न. . 2010-11) ITA NO.112/MUM/2023(A.Y.2010-11) ं.11 3/म ु ं/2023 ( न. . 2011-12) ITA NO.113/MUM/2023(A.Y.2011-12) Atul J. Shah, 611, 6 th Floor, C-Wing, Shreepati Castle, 208/210 11 th Khetwadi, Khetwadi Main Road, Mumba- 400 004. PAN: AAZPS-0720-L ...... -/Appellant बन म Vs. Income Tax Officer 19(1)(2), Matru Mandir, Mumbai 400007. ...... / /Respondent - 0 / Appellant by : Shri Tejas Shah . / 0 /Respondent by : Shri Manoj Kumar Sinha ु न ई 1 / / Date of hearing : 23/03/2023 234 1 / / Date of pronouncement : 23/03/2023 ेश/ORDER PER VIKAS AWASTHY, JM: These two appeals by the assessee are directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [ in short ‘the CIT(A)’] for the Assessment Years 2010-11 & 2011-12, respectively. Both the impugned orders are of even date i.e. 17/11/2022. 2 ITA NO.112/MUM/2023(A.Y.2010-11) ITA NO.113/MUM/2023(A.Y.2011-12) 2. Since, the issues raised in both the appeals germinate from same set of facts and identical grounds (except for amounts) are raised by the assessee, these appeals are taken up together for adjudication and are decided by this common order. 3. For the sake of convenience, the facts are narrated from appeal for assessment year 2010-11 in ITA No.112/Mum/2023. 4. Shri Tejas Shah appearing on behalf of the assessee submitted that the assessee is engaged in the business of trading in ferrous and non-ferrous metals. The assessee had filed his original return of income declaring total income of Rs.2,98,850/- on 18/09/2010. The return of the assessee was processed u/s. 143(1) of the Income Tax Act, 1961 [ in short ‘the Act’ ]. The assessee has declared G.P of 0.25%. The assessment for any 2010-11 in the case of assessee was reopened on the ground that the assessee had obtained bogus purchase bills from hawala operators. The ld. Authorized Representative for the assessee submits that as per information received by the Assessing Officer from DGIT (Investigation), Mumbai, the assessee has taken bogus purchase entries from ten parties, aggregating to Rs.2,55,29,591/-. The ld. Authorized Representative for the assessee submits that admittedly the assessee failed to appear before the Assessing Officer to discharge his onus, the Assessing Officer estimated 25% as suppression of profits on alleged bogus purchases and made addition of Rs.63,82,398/-. Aggrieved by the assessment order dated 16/03/2016 the assessee carried the issue in appeal before the CIT(A). The CIT(A) restricted the addition to 12.5% of the alleged bogus purchases. The ld. Authorized Representative for the assessee submits that the sales declared by the assessee have been accepted by the Department. The ld. Authorized Representative for the assessee prays that the CIT(A) has estimated G.P on very much higher side, a reasonable estimate may be made to disallow alleged bogus purchases. He proposed disallowance of 2-3%. 3 ITA NO.112/MUM/2023(A.Y.2010-11) ITA NO.113/MUM/2023(A.Y.2011-12) 5. Per contra, Shri Manoj Kumar Sinha representing the Department vehemently defended the impugned order. The ld. Departmental Representative submits that assessee had neither appeared before the Assessing Officer nor before the CIT(A). The assessee has failed to discharge his onus in proving genuineness of the purchases made from suspicious dealers. The assessee has obtained accommodation entries from declared hawala operators. The CIT(A) has been quite considerate in restricting the disallowance @12.5% on unproved purchases. The ld. Departmental Representative prayed for upholding the findings of the CIT(A). 6. Both sides heard, orders of the authorities below examined. Undisputedly, the assessee failed to furnish documentary evidence to prove genuineness of unproved purchases made from alleged hawala entry providers. In fact, the assessee has neither appeared before the Assessing Officer nor the CIT(A) to discharge his onus in proving genuineness of the suspicious dealers and purchases. The Assessing Officer and the CIT(A) estimated suppressed G.P on unproved purchases. Admittedly, the Assessing Officer has accepted the sales turnover and inventory declared by the assessee. In such circumstances, it is only the element of suppressed profits that has to be brought to tax [Re. PCIT vs. Paramshakhti Distributors Pvt. Ltd. in Income Tax Appeal No.413 of 2017 decided on 15/07/2019 by Hon'ble Bombay High Court.] in trading of ferrous and non-ferrous metals, generally, the G.P ranges between 5% to 8%. Considering the entire facts of the case, we modify the order of CIT(A) and restrict the addition to 7.5% of the unproved purchases. We hold and order accordingly. 7. In the result, appeal by the assessee is partly allowed. ITA NO.113/MUM/2023-A.Y.2011-12 : 8. The ld. Authorized Representative for the assessee submits that in assessment year 2011-12 the addition is on account of alleged bogus purchases. The 4 ITA NO.112/MUM/2023(A.Y.2010-11) ITA NO.113/MUM/2023(A.Y.2011-12) Assessing Officer disallowed 12.5% of alleged bogus purchases aggregating to Rs.5,13,47,017/-. The CIT(A) has upheld the same. The ld. Authorized Representative for the assessee submits that the submissions made while assailing additions in assessment year 2010-11 will equally apply for the assessment year under appeal. 9. The ld. Departmental Representative points that the reasons for making addition in the impugned assessment year is the same as was in 2010-11. In assessment year 2011-12 as well, the assessee did not appear before the authorities below and thus, failed to discharge his onus in proving genuineness of the purchases made from hawala operators. 10. Both sides heard. It is undisputed, that the facts and the reasons for making addition in the impugned assessment year is similar to assessment year 2010-11. Therefore, the findings given while adjudicating the appeal of assessee for assessment year 2010-11 will mutatis mutandis apply to assessment year 2011-12. For parity of reasons we restrict the disallowance on bogus purchases to 7.5%. Ergo, appeal of the assessee is partly allowed. 11. To sum up, appeal of assessee for assessment year 2010-11 and 2011-12 are partly allowed. Order pronounced in the open court on Thursday the 23 rd day of March, 2023. Sd/- Sd/- (SHRI S.RIFAUR RAHMAN) (VIKAS AWASTHY) ेख /ACCOUNTANT MBER /JUDICIAL MEMBER म ु ंबई/ Mumbai, 6 न ं /Dated 23/03/2023 Vm, Sr. PS(O/S) 5 ITA NO.112/MUM/2023(A.Y.2010-11) ITA NO.113/MUM/2023(A.Y.2011-12) त ल प अ े षतCopy of the Order forwarded to : 1. -/The Appellant , 2. . / / The Respondent. 3. ु 7/CIT/PCIT 4.. 8 9 . / न , . . ., म ु बंई/DR, ITAT, Mumbai 5. 9 :; ! < /Guard file. BY ORDER, //True Copy// (Dy./Asstt.Registrar) Mumbai