M/S Praj Engineers, Nashik V. Income Tax Officer, Ward-2(2), Nashik, Nashik

ITA 903/PUN/2023

AI Insights

The case involves M/s. Praj Engineers, who appealed against the order of the CIT(A) confirming the addition of Rs.3,51,088 made by the Assessing Officer (AO) on account of bogus purchases. The AO had identified these purchases as hawala transactions based on information from the Maharashtra Sales Tax Department. Despite the assessee's attempts to substantiate the purchases, including issuing a notice to the seller, the AO concluded the entries were accommodation entries. The ITAT, however, decided to follow the precedent of the jurisdictional High Court, which suggested that only the profit element of such purchases should be added to the income.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124178 (ITAT-PUNE)
• Duration Of Justice: 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 15-08-2023
• Other Referred Cases: Pr.CIT Vs. Paramshakti Distributors Pvt. Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT आयकर अपील सं. /ITA No.903/PUN/2023 नधा रण वष / Assessment Year : 2011-12 M/s. Praj Engineers, K-26, Behind Hotel Taj Residency, MIDC, Ambad, Nashik 422 010 Maharashtra PAN : AADEFP0564H Vs. ITO, Ward-2(2), Nashik Appellant Respondent आदेश / ORDER PER R.S. SYAL, VP: This appeal by the assessee arises out of the order dated 02-05-2023 passed by the CIT(A) in National Faceless Appeal Centre, Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2011-12. 2. This appeal is time barred by about 44 days. The assessee has filed an affidavit stating the reasons which led to the late filing of the appeal. The ld. DR did not seriously object to the delay. Therefore, the delay is condoned and the instant appeal is admitted for disposal on merits. Assessee by None Revenue by Shri Akhilesh Srivastava Date of hearing 28-08-2023 Date of pronouncement 28-08-2023 ITA No. 903/PUN/2023 M/s. Praj Engineers 2 3. There is no appearance from the side of assessee despite notice. I am, therefore, proceeding to dispose off the appeal ex parte qua the assessee. 4. The only issue involved in this appeal is against the confirmation of addition of Rs.3,51,088/- made by the Assessing Officer (AO) on account of bogus purchases. 5. Briefly stated, the facts of the case are that the assessee is engaged in the business of metal photo and all types of lable manufacturing. The AO, on verification of information received from the Maharashtra Sales Tax Department, observed that the assessee was one of the beneficiaries of Hawala purchases. He observed that the assessee made unsubstantiated purchases amounting to Rs.3,51,088/- from M/s. Dinesh Industrial Corporation, Mumbai, which were in the nature of accommodation entries. The assessee was called upon to prove the genuineness of the recorded purchases. The assessee submitted certain details. Notice u/s.133(6) was also issued to M/s. Dinesh Industrial Corporation, Mumbai (seller party) who had provided accommodation entries. However, it was returned by postal authority with remarks “Not known”. The AO has recorded in his order that the assessee expressed his inability ITA No. 903/PUN/2023 M/s. Praj Engineers 3 to produce the above said party. This led the AO to make the addition equal to the amount of Hawala purchases, which got echoed in the first appeal. Aggrieved thereby, the assessee has approached the Tribunal. 6. Having heard the ld. DR and gone through the relevant material available on record, it is observed that the assessee allegedly purchased aluminum sheets from M/s. Dinesh Industrial Corporation and thereafter utilized the same in the manufacture of the finished goods. In such a situation, the entire amount of purchase bill does not requires addition, but only the profit element because the aluminum sheets must have been actually purchased albeit at lower prices in lieu of which hawala bills were recorded, which were used in producing the finished goods. The Hon’ble jurisdictional High Court in Pr.CIT Vs. Paramshakti Distributors Pvt. Ltd., vide its judgment dated 15.07.2019 in ITA No.413/2017, has sustained the addition @ 10% of the amount of purchases, being, the profit element involved therein. Respectfully following the precedent, I deem it appropriate to restrict the addition to 10% of the amount of purchases. It is ordered accordingly. ITA No. 903/PUN/2023 M/s. Praj Engineers 4 7. In the result, the appeal is partly allowed. Order pronounced in the Open Court on 28 th August, 2023. Sd/- (R.S.SYAL) VICE PRESIDENT पुणे Pune; िदनांक Dated : 28 th August, 2023 सतीश आदेश की ितिलिप अ ेिषत/Copy of the Order is forwarded to: 1. अपीलाथ / The Appellant; 2. थ / The Respondent 3. 4. 5. The Pr.CIT concerned DR, ITAT, ‘SMC’ Bench, Pune गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, / Tue Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune Date 1. Draft dictated on 28-08-2023 Sr.PS 2. Draft placed before author 28-08-2023 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. *