PRAVIN POPATLAL JAIN, MUMBAI V. ITO 19 (2)(5), MUMBAI

ITA 6602/MUM/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 5525 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2021
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 21-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AIRIJU JAIKIRAN
• Keywords: Principle of natural justice; Additional evidence
• Section: 80C; 143(3); 133(6)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL “SMC” Bench, Mumbai Shri Shamim Yahya (AM) I.T.A. No. 6602/Mum/2019 (Assessment Year 2011-12) Pravin Popatlal Jain 31/A, ground floor Rajdeep Building Tara Temple Road Lamington Road Mumbai-400 007. PAN : ABOPJ6052E Vs. ITO-19(2)(5) Room No. 210 Matru Mandir Tardeo Road Mumbaiu- 400007. (Appellant) (Respondent) Assessee by None Department by Shri Airiju Jaikiran Date of Hearing 20.10.2021 Date of Pronouncement 27.12.2021 O R D E R This is an appeal by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals) [in short learned CIT(A)] dated 30.8.2019 and pertains to assessment year (A.Y.) 2011-12. 2. The grounds of appeal read as under :- Ground 1 - Adhoc Disallowance of Rs. 4,22,818/- Under the facts of and in the circumstances of the case and in law, the learned CIT(A) erred in upholding ad-hoc additions i.e 10% of various expenses made by the AO without considering the details and documents submitted during appeal proceeding. Hence, we request your honour to kindly delete ad-hoc disallowance as same is bad in law. Ground 2 - Addition (5) 12.5% minus Gross Profit Offered - Alleged Bogus Purchases of Rs. 3,32,875/- Under the facts of and in the circumstances of the case and in law, the learned CIT(A) erred in upholding addition @100%. Whereas there are numerous case laws on similar facts where additions were reduced to 12.5% minus GP offered. Thus, we request your honour to restrict the addition to 12.5% minus gross profit offered. 2 Ground 3 - Deduction under chapter VI-A Under the facts of and in the circumstances of the case and in law, the learned CIT(A) erred in not considering documents and details submitted in support of claim of deduction under chapter VI-A. Hence, we request your honour to consider and allow the same. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal. 3. Brief facts of the case are that the assessee is engaged in the business of reselling computers. The AO observed that the assessee has claimed aggregate expenses of Rs. 8,47,262/- under the heads, 'Conveyance, Freight and Office expenses' for which complete details with supportings were not furnished. The AO made a disallowance of Rs. 84,726/- @10% of this total expenditure of Rs. 8,47,262/-. Similarly, the AO made a disallowance of Rs. 1,98,642/- @ 10% of the salary expenditure claimed. Further, in course of the assessment proceedings, the AO observed that rent expenditure of Rs. 90,000/- has been claimed twice and rent of Rs. 49.450/- has been paid in cash and therefore, proceeded to disallow an aggregate amount of Rs. 1,39,450/-. Further, on the basis of differences in the income of interest, commission etc. as per 26AS and the income shown in the return of income, the AO proceeded to make an addition of Rs. 10.298/-. Further, as per the information received from the Sales Tax Department, the AO observed that the assessee has indulged in bogus purchases from M/s. Globe Impex (India) (Rs. 1,78,875/-) and M/s. M.K. Impex (Rs. 1,54,000/-), totally aggregating to Rs. 3,32,875/-. The AO issued notice u/s. 133(6) to these two parties, however, the same were returned un-served with a remark 'Left/Not known'. Despite several opportunities, the assessee did not provide transport receipts, delivery challan etc. to demonstrate that the said goods were actually received. The AO therefore, disallowed the entire purchases of Rs. 3,32,875/- . Moreover, the AO also made a disallowance of the deductions claimed u/s. 80C and 80D of an aggregate amount of Rs. 1,07,302/-. The assessment was finally completed by 3 the AO u/s. 143(3) dated 26.03.2014 at an assessed income of Rs. 18,20,320/-. 4. Upon assessee’s appeal learned CIT(A) confirmed the adhoc disallowance against various expenses on the ground that the assessee has not been able to produce necessary supporting documents. 5. Learned CIT(A) also confirmed the addition on account of bogus purchases @ 100%. Assessee’s claim of deduction of Rs. 1,07,326/- under section 80C and 80D of the I.T. Act was also rejected by learned CIT(A) despite assessee submitting additional evidences on the ground that the assessee has not availed opportunity earlier. 6. Against the above order the assessee is in appeal before the ITAT. 7. I have heard learned Departmental Representative and perused the record. As regards the adhoc disallowance of various expenses are concerned I note that the assessee has made elaborate submission before learned CIT(A). The assessee submitted that he has duly submitted the ledger account. Regarding salary, it was submitted there is only one employee. That the above expenses are made on weekly basis. It was contended that freight expenses have to be made in cash and adverse inference cannot be made. However, AO was not convinced. He made adhoc addition of 10%. 8. Upon careful consideration, I note that 10% disallowance is on higher side. 5% disallowance serves end of justice. I direct accordingly. 9. As regards addition @ of 100% out of purchases I note that the same has solely been done upon information from sales tax department and non- response of 133(6) Notice by the suppliers. Sales have not at all been doubted. In these circumstances, decision of Hon'ble Jurisdictional High Court in the case of Nikunj Eximp Enterprises Pvt. Ltd. (372 ITR 614) is applicable. In this case, it was held in this case that when sales have not doubted 100% 4 disallowance is not sustainable. In the facts and circumstances of the present case I deem it appropriate to hold that 12.5% disallowance out of non genuine purchases will serves the ends of justice. I direct accordingly. 10. As regards rejection of the claim under Chapter VI-A. I note that the assessee has submitted details before learned CIT(A). learned CIT(A) has rejected the same, not by examining or finding fault therein, but he rejected the same on the ground that earlier it was not produced before the Assessing Officer. Such an act of learned CIT(A) is in gross violation of natural justice. Accordingly I deem it appropriate not to provide second inning to the Revenue and direct that the assessee’s claim in this regard be allowed. 11. In the result, appeal by the assessee is partly allowed. Pronounced in the open court on 27.12.2021 Sd/- (SHAMIM YAHYA) ACCOUNTANT MEMBER Mumbai; Dated : 27 /12/2021 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