SHRI PIYUSH MAHENDRA DAND, MUMBAI V. ITO WD 29(2)(5), MUMBAI

ITA 606/MUM/2023

AI Insights

The case involves Piyush Mahendra Dand, the appellant, who contested the disallowance of Rs. 18,49,368 made on account of alleged bogus purchases by the Income Tax Officer (ITO). The appellant argued that the purchases were genuine and provided evidence to substantiate this claim. However, the ITO, based on information from the Sales Tax Department and subsequent investigations, deemed the transactions as non-genuine and issued a notice under section 148 of the Income Tax Act. The CIT(A) upheld the ITO's decision, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal, referencing a similar case for the assessment year 2009-10, reduced the addition from 12.65% to 8% of the bogus purchases.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300057 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 26-04-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 27-02-2023
• Other Referred Cases: ITA No. 1320/Mum/2017
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Reason to believe
• Section: 143(3); 142(1); 133(6); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHIR PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No. 606/Mum/2023 (A.Y: 2010-11) Piyush Mahendra Dand, D-102, Vardhman Nagar, DR RR Road, Near Shiv Sagar Hotel, Mulund (W) Mumbai- 400080. Vs. ITO – 29(2)(5) Kautilya Bhavan, Bandra (E), Mumbai-400051. PAN/GIR No. : AHJPD2561K Appellant .. Respondent Appellant by : Shri Ketan Vajani.AR Respondent by : Smt.Jayashree Thakur.DR Date of Hearing 27.04.2023 Date of Pronouncement 28.04.2023 आदेश / O R D E R PER PAVAN KUMAR GADALE JM: This appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi/CIT(A) passed U/sec 250 of the Act. The assessee has raised the following grounds of appeal: 1. The Commissioner of Income-tax (Appeals), hereinafter referred to as the CIT (A) has erred in confirming disallowance of Rs. 18,49.368/- made on account of alleged bogus purchases by the assessing officer. ITA No. 606/Mum/2023 Shri Piyush Mahendra Dand., Mumbai. - 2 - 2. On the facts and in the circumstances of the case, the CIT (A) has erred in not appreciating the relevant facts of the case and also the documentary evidences filed by the appellant during the course of the assessment 3. Without prejudice to the above grounds, the CIT (A) has erred in confirming the disallowance to the extent of 12.5% of the total purchases made from the alleged suspicious dealers without appreciating the fact that the appellant has already declared profit on the impugned transactions of purchases from alleged suspicious dealersand that the margin in the appellant's business is very less and hence the disallowance to the extent of 12.5% is not justified. 4. In view of the above, the appellant prays that the disallowance of Rs. 18,49.368/- shall please be deleted or any other remedy as may be deemed fit in the facts and circumstances may please be allowed to the appellant 5. The appellant craves to leave to add/ alter/delete any of the ground/s of appeal at the time of the hearing 2. 2. The brief facts of the case are that, the assessee is engaged in the business of trading in chemicals under the name and style of M/s Hema Chemicals.The assessee has filed the return of income for the A.Y 2010-11 on 30.09.2010 disclosing a total income ITA No. 606/Mum/2023 Shri Piyush Mahendra Dand., Mumbai. - 3 - Rs.5,54,658/-. The AO has received the information from DGIT (Inv), Mumbai that the assessee was engaged in bogus purchase transactions as per Sales Tax Department and the assessee is a beneficiary. The Assessing Officer (AO) has reason to believe that the income has escaped assessment and issued notice u/s 148 of the Act. Subsequently the notice u/s 143(2) and 142(1) of the Act along with questionnaire was issued. In compliance to notices the Ld. AR of the Assessee appeared from time to time and submitted the return of income, computation of income, copy of the tax audit report in form No. 3CB and 3CD, profit and loss account, balance sheet and annexure. The AO has dealt on the facts with respect to turnover and found that the assessee has made transactions of bogus purchases with 29 parties aggregating to Rs.1,47,94,942/-.The AO has called for the details to substantiate the genuineness of transactions along with the evidences. Further the A.O. has issued notice u/s 133(6) of the Act on the parties and the said notices were returned un served by postal authorities. The assessee was asked to produce the books of accounts, sales bills, purchase transactions, ITA No. 606/Mum/2023 Shri Piyush Mahendra Dand., Mumbai. - 4 - bank statement etc. The AO was not satisfied with the submissions and found that the purchase transactions are not genuine. Finally the AO has estimated the income @ 12.65% of bogus purchases which works out to Rs.18,49,368/- and assessed the total income of Rs.24,04,030/-and passed the order u/s 143(3) r.w.s 147 of the Act dated 23.03.2016. 3. Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) considered the grounds of appeal, submissions of the assessee and findings of the AO and was not satisfied with the explanations of the assessee and sustained the addition made by the AO and dismissed the assessee appeal. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Hon’ble Tribunal. 4. At the time of hearing the Ld. AR of the assessee submitted that the CIT(A) has erred in dismissing the appeal without considering the facts submitted in the course of hearing. The Ld.AR emphasized that the transactions are genuine and substantiated the submissions with the judicial decisions and factual ITA No. 606/Mum/2023 Shri Piyush Mahendra Dand., Mumbai. - 5 - paper book and prayed for allowing the appeal. Per Contra, the Ld. DR supported the order of the CIT(A). 5. Heard the rival submissions and perused the material on record. Prima-facie the contentions of the Ld.AR are that the CIT(A) has erred in sustaining the addition without considering the material information filed before the lower authorities.The Ld.AR emphasized that the addition made by the A.O is on very higher side and the Ld.AR has filed the financial statements in support of the claim. Whereas the Hon’ble Tribunal in the assessee own case for the A.Y 2009-10 in ITA No. 1320/Mum/2017 has considered these facts and restricted the addition to the extent of @8% and has observed at Page 2 Para 5 of the order as under: 5. I heard the rival contention and perused the record. Since the assessee has maintained stock register and since the Assessing Officer has accepted the sales, he has estimated the profit that would have been made on the value of alleged bogus purchases. The case of the Assessing Officer is that the assessee has sourced the materials from the grey market and obtained accommodation bills from the hawala dealers in order to account for those purchases. Accordingly, the Assessing Officer has taken the view that the assessee would have ITA No. 606/Mum/2023 Shri Piyush Mahendra Dand., Mumbai. - 6 - purchased the goods at a rate lower than that shown in the accommodation bills. 6. I notice that the VAT rate applicable on the purchases made by the assessee is 4%. I also notice that the assessee had declared gross profit rate at 5.30% in the immediately preceding year and the G.P rate has come down to 4.35% during the year under consideration. By considering both these factors, I am of the view that the G.P rate of 12.50% estimated by the AO appears to be on the higher side. Accordingly I am of the view that the profit earned on the alleged bogus purchases may be estimated at 8%. The Ld A.R placed reliance on the decision rendered by the co-ordinate bench in order to contend that the Tribunal has restricted the addition to 2%. In my view, the issue would depend upon the facts of each case and hence the decision rendered in one case cannot be taken as precedence for another case. Accordingly I modify the order passed by Ld CIT(A) and direct the AO to sustain the addition to the extent of 8% of the value of bogus purchases. 7. In the result, the appeal filed by the assessee is partly allowed. 6. Hence considering the facts, circumstances and fallow thejudicial precedence and restrict the addition @ 8% of alleged bogus purchases as against @12.65% and accordingly modify the CIT(A) order and direct the assessing officer to estimate the income @8% of ITA No. 606/Mum/2023 Shri Piyush Mahendra Dand., Mumbai. - 7 - unapproved/ bogus purchases and partly allow the grounds of appeal of the assessee. 7. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 28.04.2023. Sd/- (PAVAN KUMAR GADALE) JUDICIAL MEMBER Mumbai, Dated 28.04.2023 KRK, PS /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. आ आ / The CIT(A) 4. आ आ ( ) / Concerned CIT 5. ! !" , आ $ %, हमद द / DR, ITAT, Mumbai 6. () * + / Guard file. ान ु सार/ BY ORDER, ! //True Copy//() 1. ( Asst. Registrar) ITAT, Mumbai