VIJAYKUMAR MOHANLAL GOPALANI, ULHASNAGAR V. ITO, WARD 3(4), KALYAN

ITA 1568/MUM/2023

AI Insights

The case involves Vijay Mohanlal Gopalani, a trader in stationary and general items, who appealed against the order of the CIT(A), National Faceless Appeal Centre, Delhi, concerning the assessment year 2009-10. The primary contention was regarding the disallowance of purchases and expenses deemed bogus by the Assessing Officer. The Assessing Officer had initially disallowed the entire amount of purchases from a hawala dealer and 20% of the claimed expenses, based on information from the sales tax department. The Tribunal, after reviewing the submissions and evidence, found that a complete disallowance was unjustified and reduced the disallowances significantly.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136556 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-07-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 07-05-2023
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAGANATH B. PASALE
• Keywords: Bogus purchase; Accommodation entries; Set aside
• Section: 147; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL Mumbai “SMC” Bench, Mumbai. Before Shri B.R. Baskaran (AM) & Shri Narender Kumar Choudhry (JM) I.T.A. No. 1568/Mum/2023 (A.Y. 2009-10) Vijay Mohanlal Gopalani 204, Karishma CHS O.T. Section, Ulhasnagar Maharashtra-421 004. PAN : AENPG1964N Vs. ITO Ward-3(4) 2 nd Floor Rani Mansion Kalyan (Appellant) (Respondent) Assessee by Shri Sunil Makhija Department by Shri Naganath B. Pasale Date of Hearing 18.07.2023 Date of Pronouncement 19.07.2023 O R D E R Per B.R.Baskaran (AM) :- The assessee has filed this appeal challenging the order dated 10.3.2023 passed by the learned CIT(A), National Faceless Appeal Centre, Delhi and it relates to A.Y. 2009-10. The assessee is aggrieved by the decision of the learned CIT(A) in confirming the addition made out of purchases and expenses. 2. Facts relating to the case are stated in brief. The assessee is a trader in stationary and general items. He filed its return of the income for the year under consideration declaring total income of Rs. 2,12,670/- and the same was processed under section 143(1) of the Act. Subsequently, the Assessing Officer received information that certain dealers are indulging in providing bogus bills in the form of accommodation entries and the assessee was found to be one of the parties who has purchased goods from a hawala dealer named Vinay Trading to the tune of Rs. 81,764/-. Hence, the Assessing Officer reopened the assessment under section 147 of the Act. Since the Vijay Mohanlal Gopalani 2 assessee did not furnish any explanation, the Assessing Officer disallowed entire amount of bogus purchases of Rs. 81,764/-. The Assessing Officer further noticed that the assessee has shown gross receipts by way of sales to the tune of Rs. 62,86,378/- and he has claimed purchase expenses and other expenses to the tune of Rs. 60,73,708/-. The Assessing Officer took the view that the assessee has not proved the expenditure claimed by him and accordingly held that 20% of the expenses should be disallowed. After deducting the amount of bogus purchases already disallowed, the Assessing Officer made net disallowance Rs. 11,98,389/- out of various expenses claimed by the assessee. The learned CIT(A) also confirmed the same and hence the assessee has filed this appeal before the Tribunal. 3. We heard the parties and perused the record. The first issue relates to the disallowance of alleged bogus purchases. We noticed that the total amount of purchases made by the assessee from various parties was Rs.61,23,994/- (including VAT), out of which purchases made from Vinay Trading is Rs. 81,764/-, which works out to 1.3% to the total value of the purchases. It is the case of Learned AR that the assessee has actually purchase goods from the above said concern also and sold the same. He further submitted that the assessee is a smalltime trader and the gross profits declared by him over the year are very much comparable. Accordingly, he submitted that there was no requirement for the assessee to book bogus expenses, as he is operating at small level. Accordingly he submitted that the Assessing Officer was not justified in disallowing the alleged bogus purchases. 4. We heard learned DR and perused the record. Considering the status of the assessee as well as the quantum of purchases, we agree with the submission of learned AR that there was no necessity for the assessee to book the bogus expenditure. The assessee has also given rate of gross profit and net profit declared by him from A.Y. 2007-08 to 2011-12. We noticed Vijay Mohanlal Gopalani 3 that the gross profit of A.Y. 2009-10 i.e. the year under consideration has increased to 7.32% from 6.46% declared in the immediately preceding year. Had the assessee booked any bogus expenses, the GP rate should have gone down. We noticed that the Assessing Officer has disallowed the amount of Rs. 81,764/- by placing reliance on the information supplied by the sales tax department only, i.e. no other inquiry was conducted by the Assessing Officer to find out the truth. Accordingly, in view of the foregoing discussions and in the facts and circumstances of this case, we are of the view that there is no justification for disallowing the entire amount of alleged bogus purchases. At the same time, since there is failure on the part of the assessee to offer proper explanations, we are of the view that a portion of the said purchases may be disallowed in order to take care of the revenue leakages, if any, in the said transactions. In our view, a disallowance of 5% of value of alleged bogus purchases would meet the requirement of law. Accordingly, we set aside the order passed by the learned CIT(A) and direct the Assessing Officer to disallow 5% of the alleged bogus purchases of Rs. 81,764/-, which works out to Rs. 4,088/-. We order accordingly. 5. The next issue relates to adhoc disallowance of 20% of the expenses claimed by the assessee. The actual expense claimed by the assessee in the profit and loss account is around Rs. 2.81 lakhs only. The Assessing Officer has considered the purchases amount of Rs. 58.42 lakhs also as a part of the expenses and disallowed 20% thereof. The assessee has furnished copy of the profit and loss account at page No. 8 of the paper book and we do not notice any unusual claim of the expenses. Hence, we are of the view that the disallowance of 20% made by the Assessing Officer is very much on the higher side. Accordingly for the reasons discussed in the previous paragraph, we are of the view that a portion of expenditure may be disallowed. Accordingly, we estimate the disallowance out of various expenses at a sum of Rs. 50,000/- and in our view the same would meet the ends of justice. Accordingly we set aside the order passed by the learned CIT(A) and direct Vijay Mohanlal Gopalani 4 the Assessing Officer to restrict the disallowance out of expenses to Rs. 50,000/-. We order accordingly. 6. In the result, appeal filed by the assessee is partly allowed. Pronounced in the open court on 19.07.2023. Sd/- Sd/- (Narender Kumar Choudhry) (B.R. Baskaran) Judicial Member Accountant Member Mumbai.; Dated : 19/07/2023 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai. 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai