DCIT-17(1), MUMBAI V. NAVKAR AGEBCIES , MUMBAI

ITA 7/MUM/2023

AI Insights

The case involves the revenue's appeal against the order of the Learned Commissioner of Income Tax (Appeals), which had reduced the disallowance on non-genuine purchases from 100% to 12.5%. The assessee, M/s. Navkar Agencies, engaged in the wholesale and retail distribution of pharmaceutical products, was accused of making purchases from 'FAIR CHEM', which were deemed non-genuine as they were merely accommodation entries without actual transportation of goods. The Assessing Officer initially added the entire amount of these purchases to the assessee's income, but the CIT(A) later modified this to a 12.5% disallowance based on previous ITAT decisions. The revenue challenged this reduction, but the Tribunal upheld the CIT(A)'s decision, referencing the consistent view taken in similar cases.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123203 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-03-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 01-01-2023
• Other Referred Cases: N.K. Proteins Ltd. v DCIT [2017] 84 taxmann.com 195(SC)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Accommodation entries
• Section: 147; 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “B”, MUMBAI BEFORE SHRI AMIT SHUKLA, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NO.7/MUM/2023 (A.Y: 2010-11) DCIT – 17(1) Room No. 117, 1 st Floor G-Block, Kautilya Bhavan Bandra Kurla Complex Bandra(E), Mumbai - 400051 v. M/s. Navkar Agencies C/7, Vireshwar Chaya Tejpal Road, Vile Parle (E) Mumbai - 400057 PAN: AACFN3354L (Appellant) (Respondent) Assessee Represented by : Shri Bharat Kumar Department Represented by : Shri Chetan Kacha Date of Conclusion of Hearing : 02.03.2023 Date of Pronouncement : 29.05.2023 O R D E R PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the revenue against order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”] dated 08.11.2022 for the A.Y.2010-11. ITA NO.7/MUM/2023 (A.Y: 2010-11) M/s. Navkar Agencies Page No. | 2 2. Brief facts of the case are, the assessee engaged in the business as a wholesaler / retail dealer and distributor of pharmaceutical drugs, medicines, chemicals and allied materials and raw materials. Assessee filed its return of income on 01.10.2010 declaring income of ₹.38,84,240/- for the A.Y. 2010-11 and the return was processed u/s.143(1) of Income-tax Act, 1961 (in short “Act”). Subsequently, Assessing Officer received information from the DGIT (Investigation), Mumbai about the accommodation entries provided by various dealers and assessee was also one of the beneficiary from those dealers. The assessment was reopened u/s. 147 of the Act based on the information received from DGIT (Investigation), Mumbai, that the assessee has availed accommodation entries from “FAIR CHEM” who are said to be providing accommodation entries without there being transportation of any goods. In the reassessment proceedings, the assessee was asked to prove the genuineness of the purchases made from “FAIR CHEM”. Assessee furnished ledger accounts and other evidences and submitted that the purchases made are genuine. 3. Not convinced with the submissions of the assessee the Assessing Officer treated the purchases as non-genuine and he was of the opinion that assessee had obtained only accommodation entries without there ITA NO.7/MUM/2023 (A.Y: 2010-11) M/s. Navkar Agencies Page No. | 3 being any transportation of materials and the assessee might have made purchases in the gray market. It is the finding of the Assessing Officer that the assessee failed to produce the parties before the Assessing Officer to prove the claim of the assessee. Therefore, Assessing Officer treated purchases of ₹.10,65,454/- for the A.Y. 2010-11 as non-genuine and added to the income of the assessee. 4. Aggrieved, assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) after considering the evidences and various submissions of the assessee restricted the disallowance to the extent of 12.5% of the non-genuine purchases. 5. Aggrieved revenue is in appeal before us raising following grounds in its appeal: - “1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in restricting the disallowance made on account of bogus purchases as unexplained expenditure incurred on purchases corresponding to bogus purchases debited in books of accounts from grey market under provisions of Section 69C of the Act at 12.5% as against 100% made by Assessing Officer ignoring that the assessee was unable to prove the genuineness of the purchases debited in the books of account either by producing the suppliers for examination or by furnishing other substantiating documents to prove the genuineness of the transaction and at the same time without refuting the specific finding of the Assessing Officer in the assessment order that the assessee failed to prove to have incurred expenses in making purchases from the so-called party." ITA NO.7/MUM/2023 (A.Y: 2010-11) M/s. Navkar Agencies Page No. | 4 2. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in not appreciating the fact that the assessee failed to rebut the findings of Sales Tax Department vis-a- vis bogus purchases and overlooking the explicit findings of the investigation carried out by Sales Tax Department and corroborated by the enquiries of the Assessing Officer." 3. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in not considering that if the entire purchases are bogus then 100% addition can be made as has been held in N.K. Proteins Ltd. v DCIT [2017] 84 taxmann.com 195(SC)." The appellant craves leave to amend or alter or add a new ground which may be necessary.” 6. At the time of hearing, Ld. DR vehemently supported the orders the Assessing Officer and relied on the decision of N.K. Proteins Ltd. v DCIT [2017] 84 taxmann.com 195(SC). 7. On the other hand, Ld. AR of the assessee brought to our notice that Ld.CIT(A) restricted the disallowance to 12.5% of the non-genuine purchases by following the decision of the Coordinate Bench in assessee’s own case for the A.Ys. 2009-10 and 2011-12. Ld. AR of the assessee reiterated the submissions made before Ld.CIT(A) and supported the findings of the Ld.CIT(A). 8. Considered the rival submissions and material placed on record, on perusal of the order of the Ld.CIT(A), we find that Ld.CIT(A) considered this aspect of the matter elaborately with reference to the submissions of the assessee and the averments in the Assessment Order and also ITA NO.7/MUM/2023 (A.Y: 2010-11) M/s. Navkar Agencies Page No. | 5 following the decision in assessee’s own case for the A.Y.2009-10 and 2011-12 in ITA.No. 6763 & 6764/Mum/2016 dated 16.08.2017 restricted the disallowance to 12.5% of the non-genuine purchases. While holding so, the Ld.CIT(A) observed as under: - “6.1 I have carefully considered that facts of the case, grounds of appeal, submissions of the appellant, assessment order as well orders of Hon'ble ITAT, Mumbai, in appellants s own case. All the grounds are interlinked and therefore are taken up together for adjudication. 6.2 It has been observed that similar issue has arisen in the AY 2009- 10 and AY 2011-12 and the matter has been decided by the Hon'ble ITAT. Relevant part of the order of Hon'ble ITAT, Mumbai dated 16.08.2017 is as under:- “5. The AO has made additions on the ground that the assessee has not discharged its initial onus to prove the purchases from the said parties. No doubt, the list prepared by the Maharashtra Sales Tax Department indicates that the said parties are hawala operators involved in providing accommodation entries without actual delivery of the goods. It is also an admitted fact that the assessee has not furnished any confirmation letter from the parties. All these facts clearly show that assessee has not discharged its initial burden to prove the purchases. At the same time, the assessee has furnished certain details including purchase bills and payment proof to prove the purchases as genuine. We further observed that the AO has come to the conclusion that the purchase from the said parties are bogus in nature merely on the basis of list prepared by the Maharashtra Sales Tax Department without conducting any further enquiries with regard to incorrectness of sales declared by the assessee and quantitative details of goods traded by the assessee. No adverse comments have been made on books of accounts and stock details. Under these facts, what needs to be taxed is only profit element embedded in such purchases, but not total purchases made from alleged hawala operators. The Co-ordinate Bench of ITAT, Mumbai in the cases of bogus purchases has taken consistent view and in such cases directed the AO to estimate net profit of ITA NO.7/MUM/2023 (A.Y: 2010-11) M/s. Navkar Agencies Page No. | 6 12.5% on total alleged bogus purchases from the said parties. This fact has been brought to the notice of both the counsels. The learned Counsel for the assessee and learned DR have accepted for estimation of net profit of 12.5% on total bogus purchases. Therefore, keeping in view of the overall facts and circumstances of the case and also considering the fact that both the parties have agreed for estimation of net profit on total alleged bogus purchases, we direct the AO to estimate net profit of 12.5% on total purchase made from the said parties. We, ordered accordingly. 6. The facts and issues involved in ITA No.6764/Mum/2016 are identical to ITA No.6763/Mum/2016. Therefore, for the detailed discussion in the preceding paragraph in ITA No.6763/Mum/2016, we direct the AO to estimate net profit of 12.5% on total bogus purchases from the said parties” 6.3 Respectfully following the order of the Hon'ble ITAT, Mumbai (jurisdictional ITAT) in appellant's own case for the AY 2009-10 and AY 2011-12, the addition made by the AO is restricted to 12.5% of bogus purchases. All grounds are decided accordingly.” 9. On a careful perusal of the orders of the Ld.CIT(A) and the reasons given therein, we do not find any infirmity in the order passed by the Ld.CIT(A) in restricting the addition/disallowance to the extent of 12.5% of the purchases. Grounds raised by the revenue are dismissed. 10. In the result, appeal filed by the revenue is dismissed. Order pronounced in the open court on 29 th May, 2023 Sd/- Sd/- (AMIT SHUKLA) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 29/05/2023 Giridhar, Sr.PS ITA NO.7/MUM/2023 (A.Y: 2010-11) M/s. Navkar Agencies Page No. | 7 Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum