M/S A J COAL PVT LTD., MUMBAI V. ITO 6 (1)(1), MUMBAI

ITA 7289/MUM/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7860 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 27-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase; Peak credit
• Section: 143(1)

Judgement Text

आयकर अपीलीय अिधकरण मुंबई पीठ “एस.एम.सी” मुंबई ŵी िवकास अव̾थी, Ɋाियक सद˟ IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER आअसं.7289/मुं/2019(िन.व. 2009-10) ITA No. 7289/MUM/2019 (A.Y.2009-10) M/s A.J. Coal Private Limited C/o M/s. Jayesh Sanghrajka & Co. LLP, 405, Hind Rajasthan Centre, DS Phalke Road, Dadar (E), Mumbai-400014. PAN: AABCA0386M ...... अपीलाथŎ /Appellant बनाम Vs. ITO-6(1)(1), Room No. 503, Aayakar Bhavan, Mumbai-400020. ..... Ůितवादी/Respondent अपीलाथŎ Ȫारा/ Appellant by : None Ůितवादी Ȫारा/Respondent by : Sh. T. Shankar, DR सुनवाई की ितिथ/ Date of hearing : 25/02/2022 घोषणा की ितिथ/ Date of pronouncement : 28/02/2022 आदेश/ ORDER PER VIKAS AWASTHY, JM: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-12, Mumbai [hereinafter referred to as ‘the CIT(A)’] dated 08.05.2019 for Assessment Year (AY) 2009-10. 2. The notice of hearing of the appeal was sent to the assessee through RPAD on the address mentioned in Form-36. The notice of hearing was duly served on the assessee as is evident from acknowledgement available on record. 2 आअसं. 7289/मुं/2019 (िन.व. 2009-10) ITA No. 7289/Mum/2019 (A.Y. 2009-10) Despite repeated notices, none appeared on behalf of the assessee. It seems that the assessee is not interested in pursuing its appeal. Hence, this appeal is taken up for adjudication with the assistance of ld. Departmental Representative (DR) and the material available on record. 3. The brief facts of the case as emanating from records are: The assessee is engaged in trading of Coke & Coal. The assessee filed its return of income for the impugned AY on 29.09.2009 declaring total income of Rs. 21,10,400/-. The return of income of the assessee was processed under section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 01.03.2011. Subsequently, on the basis of information received from Sales Tax Department, Government of Maharashtra, the assessment for AY 2009-10 in the case of assessee was re-opened. As per the information received, the assessee had obtained bogus purchase bills amounting to Rs. 49,98,475/- from M/s. Sthapna Trade Impex Pvt. Ltd. during the period relevant to the AY under appeal. The name of aforesaid entity appeared in the list of hawala operators prepared by Maharashtra Sales Tax Department. During the course of re-assessment proceedings, the assessee was asked to prove genuineness of the purchases from the aforesaid party and was asked to produce the supplier, produce transport details or the evidence to show that the goods were transported, etc. Since, the assessee failed to furnish necessary documents to substantiate purchases made from alleged hawala operator, the AO made addition of the peak credit of the transactions with the aforesaid supplier. Thus, the AO made addition of Rs. 17,28,507/- on account of bogus purchases. Aggrieved by the assessment order dated 28.11.2016 passed under section 143(3) r.w.s. 147 of the Act. The assessee filed appeal before the CIT(A), interalia assailing re-opening of assessment and the addition made on merits. The CIT(A) 3 आअसं. 7289/मुं/2019 (िन.व. 2009-10) ITA No. 7289/Mum/2019 (A.Y. 2009-10) after examining the documents on record and the submissions of the assessee upheld the findings of AO regarding assessee’s involvement in bogus purchases, but granted part relief to the assessee by restricting disallowance on bogus purchases at 12.5% of such purchases. Thus, the CIT(A) restricted the addition to Rs. 6,24,809/-. Still aggrieved, the assessee is in second appeal before the Tribunal. 4. Sh. T. Shankar representing the Department vehemently supporting the order of CIT(A) prayed for dismissing the appeal of assessee. The ld. Departmental Representative (DR) submitted that the assesse has failed to substantiate genuineness of purchases made from hawala dealer. The AO has rightly held the purchases to be bogus and made addition in respect of said purchases. The CIT(A) has granted part relief to the assessee by restricting disallowance on bogus purchases to 12.5%. The order of the CIT(A) is fair and reasonable, therefore, the same should be upheld. 5. Submissions made by ld. DR heard, orders of the authorities below examined. Undisputedly, the assessee failed to discharge its onus in proving genuineness of the purchases made from alleged hawala operator. At the same time, it is observed that the sales turnover and the inventory declared by the assessee is not disputed by the Revenue. It is only the profit element embedded in unproved purchases that has to be brought to tax [Re: PCIT vs. Paramshakti Distributors Pvt. Ltd. in ITA No. 413 of 2017 decided on 15.07.2019 by Hon’ble Bombay High Court]. A perusal of impugned order shows that the assessee in submissions made before the CIT(A) has given the details of turnover, purchases and Gross Profit (GP) ratio for the AYs 2006-07 to 2010-11. For the impugned AY i.e. AY 2009-10, the assessee has declared GP of 4.175%. For the preceding three AYs and in the immediate subsequent AY the GP ranges between 4.7% to 3.5%. In 4 आअसं. 7289/मुं/2019 (िन.व. 2009-10) ITA No. 7289/Mum/2019 (A.Y. 2009-10) my considered view, estimation of GP @ 12.5% on bogus purchases is on higher side. GP on bogus purchases, if restricted to 5% would meet the ends of justice. I hold and direct accordingly. Consequently, ground no.3 raised in the appeal is dismissed and alternate prayer made in ground 4 of the appeal is allowed in the terms aforesaid. 6. In ground no. 1 & 2 of appeal, the assessee has assailed validity of re- opening. It is observed that these grounds were raised before the CIT(A) as well. The CIT(A) after having examined the facts and various decisions relied on by the assessee has dismissed these grounds. No material is available before the Tribunal to take a contrary view, hence, the findings of CIT(A) on this legal issue are upheld and ground no.1 & 2 of the appeal are dismissed. 7. In the result, appeal of assessee is partly allowed in the terms aforesaid. Order pronounced in the open court on Monday, the 28 th day of February, 2022. Sd/- (VIKAS AWASTHY) Ɋाियक सद˟/JUDICIAL MEMBER मुंबई/ Mumbai, िदनांक/Dated: 28/02/2022 S.K., Sr. PS Ůितिलिप अŤेिषतCopy 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