SHRI PRANAV NALIN MEHTA , NAGPUR V. PR.CIT-1, NAGPUR , NAGPUR

ITA 28/NAG/2019

AI Insights

The case involves Pranav Nalin Mehta, the proprietor of M/s. Regal Marbles & Minerals, who appealed against the order of the Pr.CIT, Nagpur-1, which was passed under section 263 of the Income-tax Act, 1961. The original assessment for the year 2011-12 had been completed under sections 143(3) read with section 147, assessing the total income at Rs.5,60,590. The Pr.CIT observed that the assessee had made unsubstantiated purchases amounting to Rs.6,37,988 from M/s. Nisha Enterprises, which were considered accommodation entries, and directed a fresh assessment, suggesting that the entire amount of these purchases should be added to the income. The ITAT, however, found that only the profit element from these purchases should be added, referencing several judgments from the Hon'ble High Courts that supported this view.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301416 (ITAT-NAGPUR)
• Duration Of Justice: 4 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-08-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 03-02-2019
• Other Referred Cases: Pr.CIT Vs. M/s. Mohammad Haji Adam and Company, Pr.CIT Vs. Batilboi Environmental Engineering Ltd., PCIT Vs. Paramshakti Distributors Pvt. Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Accommodation entries
• Section: 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH (At e- Court, Pune) BEFORE SHRI R.S.SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं. / ITA No.28/Nag/2019 नधा रण वष / Assessment Year : 2011-12 Pranav Nalin Mehta, Prop. M/s. Regal Marbles & Minerals, 101, 1 st Floor, Ramdeobaba Apartment, Bajaj Nagar, Nagpur 440 010 PAN : ACDPM8305P Vs. Pr.CIT-1, Nagpur Appellant Respondent Assessee by : Shri K.P. Dewani Revenue by : Shri Kailash Kanojiya स ु नवाई क तार ख / Date of Hearing : 22.08.2023 घोषणा क तार ख / Date of Pronouncement : 23.08.2023 आदेश / ORDER PER R.S.SYAL, VP: This appeal by the assessee is directed against the order dated 30-03-2018 passed by the Pr.CIT, Nagpur-1 u/s.263 of Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2011-12. 2. The appeal is time barred by 250 days. The assessee has filed an affidavit explaining the reasons for the delay. We are satisfied with the reasons. The delay in filing the appeal is, therefore, condoned and the appeal is admitted for disposal on merits. 2 ITA No.28/Nag/2019 Pranav Nalin Mehta 3. Briefly stated, the facts of the case are that assessment in this case was completed by means of an order u/s.143(3) r.w.s.147 assessing total income at Rs.5,60,590/-. The ld. Pr.CIT, on perusal of records, observed that the assessee made unsubstantiated purchases amounting to Rs.6,37,988/- from M/s. Nisha Enterprises which were in the nature of accommodation entries. He noticed that the AO made an addition of Rs.51,677/- to the returned income on this score, being, the gross profit @8.10% on the unsubstantiated purchases of Rs.6,37,988/-. In his opinion, the addition ought to have been made for the full amount of purchases at Rs.6,37,988/-. That is how, he set-aside the assessment order by treating it as erroneous and prejudicial to the interest of the Revenue directing the AO to frame the assessment afresh. 4. After hearing the rival submissions and going through the relevant material on record, it is seen that the assessee recorded bogus purchases in respect of which the AO made an addition at the gross profit rate at 8.10%. The view point of the ld. Pr.CIT that the addition should have been made for the whole amount of purchases is contrary to various judgments of the Hon’ble High Courts, including, that of the Hon’ble Bombay High Court in Pr.CIT Vs. M/s. Mohammad Haji Adam and Company (2019) 104 CCH 0391 Mum-HC holding that addition cannot be made for the bogus amount of purchases. In Pr.CIT 3 ITA No.28/Nag/2019 Pranav Nalin Mehta Vs. Batilboi Environmental Engineering Ltd. (2022) 446 ITR 238 (Bom.), the Hon’ble Bombay High Court has held that only the profit element in the bogus purchases can be added and not the amount of purchases. Similar view has been canvassed in PCIT Vs. Paramshakti Distributors Pvt. Ltd. ( ITA No.413/2017 dated 15-07-2019). 5. In view of the above discussion, it is clear that the AO passed the correct order by making the addition towards gross profit on the bogus purchases. The view point of the ld. Pr.CIT that the addition should have been made towards the amount of purchases is, ergo, not sustainable. We, therefore, overturn the impugned order. 6. In the result, the appeal is allowed. Order pronounced in the Open Court on 23 rd August, 2023. Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT प ु णे / Pune; दनांक / Dated : 23 rd August, 2023 Satish 4 ITA No.28/Nag/2019 Pranav Nalin Mehta आदेश क त ल प अ े षत / Copy of the Order forwarded to : 1. अपीलाथ / The Appellant. 2. !यथ / The Respondent. 3. The Pr.CIT concerned. 4. "वभागीय त न%ध, आयकर अपील य अ%धकरण, “नागप ु र” ब ' च, / DR, ITAT, “Nagpur” Bench 5. गाड फ़ाइल / Guard File. // True Copy // आदेशान ु सार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपील य अ%धकरण, प ु णे / ITAT, Pune * Date 1. Draft dictated on 22-08-2023 Sr.PS 2. Draft placed before author 23-08-2023 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order.