DILIP SUMERMAL KANUGO, MUMBAI V. I.T.O.-19(1)(4), MUMBAI

ITA 1331/MUM/2023

AI Insights

The case involves Shri Dilip Sumermal Kanugo, who appealed against the order of the National Faceless Appeal Centre (NFAC) which upheld an addition of Rs.8,84,997 to his income for the assessment year 2010-11. This addition was initially made by the AO, who treated 12.5% of the total purchases amounting to Rs.70,79,972 from certain dealers as non-genuine or bogus, based on information from the Directorate General of Income Tax (Investigation), Mumbai. The CIT(A) confirmed this addition, leading to the present appeal. The Tribunal, referencing a similar case and the GP rates declared by the assessee on genuine purchases, decided to reduce the addition to 6%.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301307 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 09-07-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 19-04-2023
• Other Referred Cases: Pr. CIT vs. Mohommad Haji Adam & Co. & Ors.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B. LAXMI KANTH
• Keywords: Bogus purchase; Accommodation entries; Set aside
• Section: 147; 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER ITA No.1331/M/2023 Assessment Year: 2010-11 Shri Dilip Sumermal Kanugo, C/o. D.C. Bothra & Co. LLP(CA) (formerly known as D.C. Bothra & Co.), 297, Tardeo Road, Wille Mansion, 1 st Floor, Opp. Bank of India, Nana Chowk, Mumbai – 400 007 PAN: AADPK9350N Vs. I.T.O-19(1)(4), Room No.203, 2 nd Floor, Matru Mandir, Tardeo Road, Mumbai – 400 007 (Appellant) (Respondent) Present for: Assessee by : Shri Rajkumar Singh, A.R. Revenue by : Shri B. Laxmi Kanth, D.R. Date of Hearing : 10 . 07 . 2023 Date of Pronouncement : 25 . 07 . 2023 O R D E R Per : Kuldip Singh, Judicial Member: The assessee by filing the present appeal, sought to set aside the impugned order dated 28.02.2023 passed by the National Faceless Appeal Centre(NFAC) [Commissioner of Income Tax (Appeals), Delhi] (hereinafter referred to as CIT(A)] qua the assessment year 2010-11 on the grounds inter-alia that :- “1. That on facts and circumstances of the case and in law adhoc 12.5% dsallowance made by Id. AO and upheld by Id. CIT(Appeals) at ITA No.1331/M/2023 Shri Dilip Sumermal Kanugo 2 Rs.8,84,997/- being out of trading purchases of Rs.70,79,972/- made from dealers alleged to be hawala parties treating the same as ungenuine on only basis of information received from DGIT (Inv.), Mumbai that too without bringing any adverse material on record in addition to without properly appreciating various supporting documentary evidences, details and also cogent explanations furnished on record hence impugned addition made being wrong on facts and bad in law therefore may be deleted. 2. That without prejudice to appeal ground no. 1, impugned estmated addition made @12.5% of alleged ingenuine purchases may be restricted to the extent of GP rate on sale of undisputed purchases as decided by hon'ble Tribunal in assessee's own case in respect of exactly similar estimated disallowance made on very same identical facts for two other assessment years. 3. That both the appeal grounds are independent grounds and without prejudice to each other. 4. That the appellant craves the leave to amend, alter, substitute and or to raise new or additional grounds of appeal at the time of hearing.” 2. Briefly stated facts necessary for consideration and adjudication of the issues at hand are : the assessee is into the business of reseller of ferrous and non ferrous metals as a proprietorship concern of M/s. Manidhari Stainless (India) and its name appears in the list given by the Sales Tax Department being into availing accommodation entries either to inflate the purchases or expenses in order to reduce their tax liability and to avoid sales tax. It has come on record that the assessee has allegedly made purchases of Rs.70,79,972/- as inflated/non genuine purchases from following parties: Name of the Hawala Parties PAN F.Y. Amount in Rs. DONEAR TRADING PRIVATE LIMITED AACCD4946K 2009-10 1,403,543 ROOPAM IMPEX AKHPP3025B 2009-10 2,274,906 RAMANI METAL CORPORATION AIRPD5688A 2009-10 74,815 ASIAN METAL INDUSTRIES AFMPV5880N 2009-10 541,280 ITA No.1331/M/2023 Shri Dilip Sumermal Kanugo 3 JAY AMBE METAL ALMPD1361L 2009-10 570,924 PRIME STEEL IMPEX ALOPB9958K 2009-10 800,000 SHANKESHWAR CABLES CORPORATION AMOPB7694R 2009-10 104,504 SATYAM METAL & ALLOYS ALRPB9548E 2009-10 1,310,000 70,79,972 3. On the basis of above information the Assessing Officer (AO) reopened the assessment on the ground that part of the income of the assessee for the year under consideration has escaped assessment and thereby initiated the reopening proceedings under section 147/148 of the Income Tax Act, 1961 (for short ‘the Act’). Necessary notices under section 143(3) & 142(1) of the Act were issued. Declining the submissions/contentions raised by the assessee the AO proceeded to hold that the assessee indulged in getting accommodation entry/bogus purchase bills in order to suppress its true profits and to further reduce the tax liability there and thereby made an addition of Rs.8,84,997/- being 12.5% of the total non genuine purchases of Rs.70,79,972/- and thereby framed the assessment under section 143(3) read with section 147 of the Act. 4. The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has confirmed the addition by dismissing the appeal. Feeling aggrieved with the impugned order passed by the Ld. CIT(A) the assessee has come up before the Tribunal by way of filing present appeal. ITA No.1331/M/2023 Shri Dilip Sumermal Kanugo 4 5. I have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto. 6. Undisputedly both the AO as well as the Ld. CIT(A) have proceeded to estimate the addition on the bogus purchases allegedly made by the assessee, as he has failed to substantiate the same, @ 12.5% of the total bogus purchases on the ground that sales by the assessee were not doubted. It is also not in dispute that in such like cases Hon’ble Bombay High Court as well as the Tribunal have proceeded to estimate the addition on the bogus purchases equivalent to gross profit shown by the assessee in genuine purchases. 7. In the backdrop of the aforesaid facts and circumstances of the case the Ld. A.R. for the assessee contended that in the identical facts and circumstances the Tribunal, in assessee’s own case, has made the addition on the basis of bogus purchases to the extent of GP rate otherwise claimed by the assessee on genuine purchases in A.Y. 2009-10 in ITA No.5194/M/2019. 8. However, on the other hand, the Ld. D.R. for the Revenue in order to repel the argument addressed by the Ld. A.R. for the assessee contended that every case is to be determined on the facts of its own and supported the order passed by the Ld. CIT(A). 9. Keeping in view the settled principle of law by the Hon’ble Bombay High Court in case of Pr. CIT vs. Mohommad Haji Adam ITA No.1331/M/2023 Shri Dilip Sumermal Kanugo 5 & Co. & Ors. (2019) 104 CCH 0391. I am of the considered view that profit element in such like bogus purchases is to be estimated on the basis of GP otherwise declared by the assessee on its genuine purchases particularly when sales are not disputed by the AO. Ld. A.R. for the assessee contended that his GP for the earlier years is in the range of 4% to 6%. In view of the matter the addition made by the Ld. CIT(A) on the bogus purchases is restricted to 6% which is commensurate to the GP otherwise declared by the assessee on its genuine purchases. 10. In view of what has been discussed above the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 25.07.2023. Sd/- (KULDIP SINGH) JUDICIAL MEMBER Mumbai, Dated: 25.07.2023. * Kishore, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// By Order Dy/Asstt. Registrar, ITAT, Mumbai.