PUSHPABEN CHANDULAL SHAH, MUMBAI V. CIT (A) NFAC, MUMBAI

ITA 2096/MUM/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6364 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC-1
• Assessment Year: 2011-2012
• Appeal Filed On: 16-11-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NIMISH SHAH
• Keywords: Bogus purchase; Tax effect; Question of law
• Section: 147; 148; 69C; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No. 2096/Mum/2021 (A.Y. 2011-12) Pushpaben Chandulal Shah, D-3, Siddhapura Industrial Estate, L.B.S Marg, Ghatkopar (W), Mumbai-400086. PAN: AAPPS2890B ...... Appellant Vs. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Mumbai. ..... Respondent Appellant by : Sh. Rajesh Shah & Sh. Nimish Shah Respondent by : Sh. Ashish Kumar, Sr. DR Date of hearing : 04/07/2022 Date of pronouncement : 16/09/2022 ORDER PER GAGAN GOYAL, A.M: This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi [hereinafter referred to as (‘NFAC)] under section 250 of the Income Tax Act, 1961 ( for short ‘the Act’) dated 29.09.2021 for the Assessment Year (AY) 2011-12. The assessee has raised the following grounds of appeal: 2 ITA No. 2096/Mum/2021-Pushpaben Chandulal Shah Sr.No. Grounds of appeal Tax effect relating to each Ground of appeal. 1. 1. The assessee has made genuine purchases and made payment for purchases by A/c payee cheques. The material purchased is used in manufacturing finished goods which are sold. Assessee has shown corresponding sales as income and paid tax on the taxable income (profit element) thereon. Your honour, the INCOME TAX APPELLATE TRIBUNAL has assessed the assessee and made additions @ 12.5% of the impugned purchases in A.Y 2009-10. The assessee prays to add 12.5% of the impugned purchases or at the rate of G.P. The CIT (A) has also given relief to assessee and made additions @12.5% of the impugned purchases in A.Y 2010-11. The assessee prays to add, alter or amend the ground of appeal. In many judicial pronouncements on issue, the Courts have taken a consistent view that in case of non-existent parties from which the purchases are shown to have been made; only a part of such purchases can be disallowed, particularly in such cases where the corresponding sales are not doubted. Alternatively, the profit embedded in such sale against the alleged bogus purchases should be brought to tax. Rs. 3,73,740/- 2. G.P. Ratio of assessee For A.Y. 2009-10 G.P. Ratio of assessee For A.Y. 2010-11 G.P. Ratio of assessee For A.Y. 2011-12 16.23 15.17 19.78 2. Brief facts of the case are that the assessee is an individual filed her return of income on 21-09-2011 declaring total income at Rs. 8,44,706/-. The return of income was processed under section 143(1) of the Act. Thereafter, an information received from the office of DGIT (Inv.), Mumbai about various parties involved as 3 ITA No. 2096/Mum/2021-Pushpaben Chandulal Shah hawala dealers involved as issuer of bogus purchase bills to various assesses of Mumbai to suppress the profit. Names of the parties involved in issuing the bills and beneficiaries also confirmed by the sales tax authorities of states. The details of bills and parties from whom bills have been taken are as under: S.No. Name of the Hawala parties Pan Bill amount 1. National Trading Co. AAGFNoo83N 2,26,464/- 2. Mihir Enterprises AABPS5358J 11,186/- 3. Amar Enterprises AIRPB6559J 94,921/- 4. Matoshree Traders AKYPR2526C 3,38,489/- 5. Adinath Enterprises BXIPS3607M 61,531/- 7,32,591/- 3. Based on above information a notice u/s 148 of the Act was issued to the assessee on 18-03-2016. In response to the said notice assessee vide letter dated 06-04-2016 requested to treat the original return filed as a return in response to notice u/s 148. During the year under consideration assessee was engaged in the business of manufacturing of Dies, Tools and Hardwares. 4. During the course of assessment proceedings notice u/s 33(6) were issued to the parties involved in issuing the bills to the assessee. But none of the party came forward in response to notice u/s 133(6). Then A.O asked the assessee to produce the parties for verification but assessee also expressed his inability to produce those parties. During the assessment proceedings assessee has merely furnished ledger accounts and invoices of the relevant purchase. Despite of specific query from A.O about delivery challans and details of transportation, assessee failed to produce the same. In addition to above the defaulter parties confessed before the sales tax authorities that they are in the business of issuing 4 ITA No. 2096/Mum/2021-Pushpaben Chandulal Shah bills without actually selling any materials. In view of this A.O treated these transactions of purchase as in-genuine and applying the decision in the case of M/s Kachwala Gems Vs. JCIT (2006) 206 CTR (SC). 5. Being aggrieved with the order of A.O assessee preferred an appeal before the Ld. CIT (A)-5, Delhi (NFAC). Ld. CIT (A) also endorsed the views of A.O and dismissed the appeal of assessee. 6. Against this order of Ld. CIT (A) assessee preferred an appeal before us. we have gone through the order of the A.O, order of the Ld. CIT(A) and arguments and submissions of the assessee emanating out of various orders and paper-book submitted by the assessee. Following facts are being emerged out of above in the mattes as under: a) Assesses case was assessed u/s 147 based on inputs received from state sales tax department and DGIT (Inv.), Mumbai ; b) Parties involved in issuing bogus purchase bills, confessed about their modus operandi before the state sales tax authorities c) Assessee was not able to produce any evidence about actual delivery of goods from these alleged parties. d) Department hadn’t challenged the books of accounts and specifically the sales of the assessee. 7. In view of the above facts we can reasonably observe that assessee had made purchases in cash to avoid burden of indirect taxes. To introduce these transactions in regular books of accounts he entered into the bogus purchase transactions with alleged parties. We confirm the findings of A.O treating these 5 ITA No. 2096/Mum/2021-Pushpaben Chandulal Shah transactions as bogus purchase bills but we further relied on the decisions of Hon’ble jurisdictional high court in there following pronouncements as under.  [2019] 103 taxmann.com 459 (Bombay) Principal Commissioner of Income-tax-17 v. Mohommad Haji Adam & Co. Section 69C of the Income-tax Act, 1961 - Unexplained expenditure (Bogus purchases) - Assessee was a trader of fabrics - In course of assessment, Assessing Officer noted that certain purchases made by assessee were bogus - He thus added said amount to assessee's taxable income - Tribunal noted that there was no discrepancy between purchases shown by assessee and sales declared - Accordingly, Tribunal restricted addition limited to extent of bringing gross profit rate on purchases at same rate as applied in other genuine purchases – Whether, on facts, no substantial question of law arose from Tribunal's order - Held, yes [Paras 8 and 9][In favour of assessee]  [2022] 141 taxmann.com 245 (Bombay) Principal Commissioner of Income-tax v. Batliboi Environmental Engineering Ltd.* I. Section 69C of the Income-tax Act, 1961 - Unexplained expenditure (Bogus purchases) - Assessment year 2011-12 - Assessing Officer treated purchases made by assessee as bogus purchases and disallowed in totality - Commissioner (Appeals) directed Assessing Officer to disallow 12.5 per cent of bogus purchases and to add 12.5 per cent of amount of purchases to income of assessee - Tribunal upheld view of Commissioner (Appeals) - Revenue contended before High Court that bogus purchases ought to have been disallowed in totality - It was noted that if factum of sales had been accepted by department then even if it was established that there were bogus purchases, it was not necessary that entire amount of purchases should be added to income of assessee as there could not be a sale without purchase - In instant case sales effected by assessee had been accepted by department - Whether Tribunal was right in upholding view of Commissioner (Appeals) - Held, yes [Para 4] [In favour of assessee] 8. Accordingly, respectfully following the decisions of Hon’ble Jurisdictional High Court, we restricted addition limited to the extent of bringing gross profit rate on purchases at same rate as applied in other genuine purchases. We direct the A.O to re-compute the disallowance on alleged bogus purchase. We further drew reference from ITA No. 7511 & 5180/Mum/2018 for A.Y. 2009-10 & 2010-11 in assessee’s own case where disallowance of 12.5% has been sustained and 6 ITA No. 2096/Mum/2021-Pushpaben Chandulal Shah accepted by assessee and Revenue both. We, therefore, direct the authorities below to restrict the disallowance upto 12.5% on bogus purchases. 9. In the result, appeal filed by the assessee is allowed with the above directions. Order pronounced in the open court on 16 th day of September, 2022. Sd/- Sd/- (KULDIP SINGH) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, िदनांक/Dated: 16/09/2022 SK, Sr.PS Copy of the Order forwarded to: 1. अपीलाथŎ/The Appellant , 2. Ůितवादी/ The Respondent. 3. आयकर आयुƅ(अ)/ The CIT(A)- 4. आयकर आयुƅ CIT 5. िवभागीय Ůितिनिध, आय.अपी.अिध., मुबंई/DR, ITAT, Mumbai 6. गाडŊ फाइल/Guard file. BY ORDER, //True Copy// (Dy. /Asstt. Registrar) ITAT, Mumbai