ITO - 22(3)(6), MUMBAI V. SHI ROHIT CHANDULAL VORA, MUMBAI

ITA 173/MUM/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8692 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 23-02-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

ITA No.173/Mum/2021 Assessment Year: 2011-12 Page 1 of 4 INCOME TAX APPELLATE TRIBUNAL MUMBAI ‘SMC’ BENCH, MUMBAI [Coram: Pramod Kumar (Vice President)] ITA No.173/Mum/2021 Assessment Year: 2011-12 Income Tax Officer, 22(3)(6) Mumbai. .......................... Appellant Vs. Rohit Chandulal Vora .......................Respondent 21, Jain Bhuvan, Bhavani Shankar Road, Dadar (West) Mumbai 400 028 [PAN: AADPPV9132N] Appearances: Milind Chavan for the appellant Jaysukh Mehta for the respondent Date of concluding the hearing : 11.03.2022 Date of pronouncement : 10.06.2022 O R D E R Per Pramod Kumar, VP: 1. By way of this appeal, the Assessing Officer has challenged the correctness of the order 13 th August 2020, passed by the learned CIT(A) in the matter of assessment u/s. 143(3) r.w.s.147 of the Income Tax Act, 1961 for the assessment year 2011-12. 2. Grievances raised by the Assessing Officer are as follows: a) Whether on the facts and circumstances of the case and in law, the Ld CIT(A) is right in restricting addition made by the A.0 amounting to Rs.2,21,168/- is 25% of total bogus purchase of Rs. 8, 84,672/-, ignoring the fact that the action of the Assessing Officer was based on credible information received from the Director General of Income Tax (Investigation), Mumbai received from the Maharashtra Sales tax and that the assessee, during the course of assessment proceedings, failed to prove the genuineness of the purchase transactions? (b Whether on the facts and circumstances of the case and in law, the CIT(A) is right in estimating addition on account of bogus purchase to 25% of such purchases as against the estimation by the AO of 100% of bogus purchases without appreciating that the assessee had failed to establish the genuineness of the alleged parties from whom purchases is claimed to have been made during the year? ITA No.173/Mum/2021 Assessment Year: 2011-12 Page 2 of 4 (c ) Whether on the facts and circumstances of the case and in law, the CIT(A) is right in estimating addition on account of bogus purchase to 25% of such purchases as against the estimation by the AO of 100% of bogus purchases without appreciating that the assessee could neither produce the delivery challans nor could produce the alleged parties from whom purchases is claimed to have been made during the year? (d) Whether on the facts and circumstances of the case and in law, the CITIA) is right in estimating addition on account of bogus purchase to 25% of such purchases as against the estimation by the AO of 100% of bogus purchases without appreciating that the Director General of Income Tax (Investigation), Mumbai during their course of investigations found the alleged parties to be providing only accommodation/ bogus purchase bills? (e) Whether on the facts and circumstances of the case and in law, the CIT(A) is right in estimating addition on account of bogus purchase to 25% of such purchases as against the estimation by the AO of 100% of bogus purchases appreciating the ratio of the decision of the Hon'ble Supreme Court in the case of N.K. Proteins Ltd., wherein the Court has held that when the purchases are from bogus suppliers, the entire purchases are liable to be disallowed? (f) This case is filed because it is covered under the exception provided in para 10(e) of the CBDT's Circular No.3 of 2018 dated 11.07.2018 as amended vide F No. 279 / Misc. 142/ 2007 ITJ(Pt) dated 20.08.2018. (g) The appellant prays that the order of the CIT(A) on the above ground be reversed and that of the Assessing Officer be restored. 3. To adjudicate on this appeal it is sufficient to take note of the fact that in this case the addition was made on the basis of inputs from the investigation wing to the effect that the assessee has taken certain bogus purchase bills aggregating to Rs. 8,84,672/-. When the matter travelled in appeal before the learned CIT(A) upheld the addition only to the extent of 25% by observing inter alia as follows:- 6.1 However, considering the totality of facts and circumstances of the issue involved, in my considered opinion, the AO is not justified in making disallowance of 100% of purchase as the enquiries did not prove that the appellant has not purchased any material from any grey market. By purchasing material from some other party and taking bill from the party under consideration, the assessee definitely has taken some benefits and only that profit element needs to be added. I am of the view that 25% of disallowance out of purchase of Rs. 8,84,672/- will meet the ends of the justice. Therefore, disallowance @25% of purchase of Rs. 8,84,672/- = Rs. 2,21,168/- is hereby sustained and balance disallowance being 75% of Rs. 8,84,672/- = Rs. 6,63,504/- is hereby deleted. The ground of appeal is partly allowed. 4. The Assessing Officer however is not satisfied and is in appeal before us. 5. I have heard the rival contentions perused the material on record and duly considered facts of the case in the light of the applicable legal position. 6. I find that the series of the co-ordinate benches have directed identical issue and upheld the addition based on a much lower figure then the figure of 25%. Learned Departmental Representative fairly agree that a coordinate bench of this tribunal, in the case of Rollon Hardware India Pvt. Ltd., in ITA No. 1621/Mum/2018 order dated 05.11.2018, has in similar facts and circumstances inter alia, observed as follows: ITA No.173/Mum/2021 Assessment Year: 2011-12 Page 3 of 4 4. In support of his case Ld. counsel of the assessee has placed reliance upon the decision of Hon’ble Gujarat High Court in the case of Pr. CIT Vs. T.R. Kapadia in Tax Appeal No.691 of 2017. 5. In this case the Hon’ble High Court has confirmed the deletion of disallowance on account of alleged bogus purchase as necessary documentary evidence for the purchase were on record. 6. The special leave petition against this order has been dismissed by the Hon’ble Supreme Court in its decision dated. 04.05.2018 S.L.P. Civil Diary No.12670/2018. 7. Up on careful consideration, I find that assessee has provided the documentary evidence for the purchase. Adverse inference have been drawn due to the inability of the assessee to produce the suppliers. I find that in this case the sales have not been doubted. It is settled law that when sales are not doubted, hundred percent disallowance for bogus purchase cannot be done. The rational being no sales is possible without actual purchases. This proposition is supported from Hon’ble Jurisdictional High Court decision in the case of Nikunj eximp enterprises (in writ petition no. 2860, order dt. 18.06.2014. In this case the Hon’ble High Court has upheld hundred percent allowance for the purchases said to be bogus when sales are not doubted. However, in that case all the suppliers were government agency. In the present case the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expenses of the exchequer. In such situation in my considered opinion on the facts and circumstances of the case the 12.5% disallowance out of the bogus purchases meets the end of justice. However, in this regard Ld. counsel of the assesse has prayed that when only the profits earned by the assessee on these bogus purchase transaction is to be taxed the gross profit already shown by the assessee and offered to tax should be reduced from the standard 12.5% being directed to be disallowed on account of bogus purchase. 7. I, therefore, see no merit is Assessing Officer’s grievance that the CIT(A) erred in upholding the addition to the extent of 25%. The findings of the CIT(A) do not call for any interference at the instance of the Assessing Officer. The plea is rejected. 8. In the result, this appeal is dismissed. Pronounced in the open court today on the 10 th day of June2022. Pramod Kumar (Vice President) Mumbai, dated the 10 th day of June 2022. Copies to: (1) The Appellant (2) The respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File ITA No.173/Mum/2021 Assessment Year: 2011-12 Page 4 of 4 By order True Copy Assistant Registrar/Sr.PS Income Tax Appellate Tribunal Mumbai benches, Mumbai