M/s. Sankalp Enterprises, Pune V. Income-tax Officer, Ward - 9 (4), Pune

ITA 973/PUN/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9462 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 04-07-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 201; 13; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI , JUDICIAL MEMBER I TA NO. 973 /PUN/201 9 / ASSESSMENT YEAR : 20 1 1 - 1 2 M/S. SANKALP ENTERPRISES S HOP NO.8, PRASAD INDUSTRIAL COMPLEX, SARASWATI ROAD, HAVELI PUNE 411014 PAN : A BSFS2291L VS. ITO, WARD 9(4) , PUNE APPELLANT RESPONDENT / ORDER PER S.S. VISWANETHRA RAVI , JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 13 - 0 5 - 201 9 PASSED BY THE CIT(A) - 8 , PUNE IN RELATION TO THE ASSESSMENT YEAR 20 1 1 - 1 2 . 2. THE ONLY ISSUE RAISED IN THE INSTANT APPEAL IS AGAINST C ONFIRMATION OF THE ADDITION ON ACCOUNT OF BOGUS PURCHASES. 3. F ACTUAL MATRIX OF THE CASE IS THAT THE ASSESSING OFFICER (AO) RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, MAHARASHTRA ABOUT THE RACKET OF BOGUS PURCHASE TRANSACTIONS . THE LIST OF A SSESSEE BY NONE RE VENUE BY SMT. SHABANA PARVEEN DATE OF HEARING 20 - 0 8 - 2020 DATE OF PRONOUNCEMENT 20 - 0 8 - 2020 ITA NO . 973 /PUN/ 201 9 M/S. SANKALP ENTERPRISES 2 BENEFI CIARIES INCLUDED THE NAME OF ASSESSEE AS WELL IN RESPECT OF BOGUS PURCHASES OF RS.21,09,408 . THE AO ISSUED NOTICE U/S 148 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE CONFESSED TO HAVE OBTAINED BOGUS BILLS. IT, HOWEVER, REQUESTE D TO ADD THE GROSS PROFIT OF 21.55% ON SUCH BOGUS BILLS TO THE TOTAL INCOME. NOT SATISFIED, THE AO ESTIMATED GROSS PROFIT AT 40%. WHEN THE MATTER CAME UP BEFORE THE LD. CIT(A), HE OPINED THAT THE ADDITION OUGHT TO HAVE BEEN MADE FOR THE FULL AMOUNT OF PU RCHASES RATHER THAN 40%. HE THEREFORE, MADE ENHANCEMENT AND CONFIRMED THE ADDITION AT RS.21,09,408. AGGRIEVED THEREBY, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE LD. DR THROUGH VIRTUAL COURT AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. THERE IS NO APPEARANCE FROM THE SIDE OF THE ASSESSEE , DESPITE SEVERAL NOTICES . THE APPEAL CAME UP FOR HEARING FOR THE FIRST TIME BEFORE THE TRIBUNAL ON 26 - 08 - 2019 . ON FINDING THE ASSESSEE UNREPRESENTED , THE MATTER WAS ADJOURNED FOR 30 - 09 - 201 9. THE ASSESSEE STILL REMAINED ABSENT. SEVERAL NOTICES WERE ISSUED, BUT THE ASSESSEE DID NOT RESPOND. THE LAST NOTICE FIXED THE HEARING FOR TODAY . A GAIN THE ASSESSEE HAS NEITHER ATTENDED THE PROCEEDINGS NOR FURNISHED ANY APPLICATION FOR ITA NO . 973 /PUN/ 201 9 M/S. SANKALP ENTERPRISES 3 ADJOURNMENT . AS SUCH, WE ARE PROCEEDING TO DISPOSE OFF THE APPEAL EX - PARTE QUA THE ASSESSEE ON MERITS . 5. IT IS AN ADMITTED POSITION THAT THE ASSESSEE OBTAINED BILLS FOR BOGUS PURCHASES AMOUNTING TO RS.21,09,408. THE FACT THAT THE CORRESPONDING PURCHASES WERE SOLD BY THE ASSESSEE HAS NOT BEEN CONTROVERTED. IN SUCH A SITUATION, THE ADDITION CANNOT BE MADE FOR THE AMOUNT OF BOGUS PURCHASES , BUT ONLY FOR ADDITIONAL COST ELEMENT EMBEDDED IN SUCH BILLS , WHICH THE ASSESSEE WAS TRYING TO SAVE BY RECORDING PURCHAS ES AT HIGHER PRICE. THE HONBLE BOMBAY HIGH COURT HAS LAID DOWN THIS PROPOSITION IN SEVERAL DECISIONS INCLUDING PR. CIT & ORS. VS. MOHOMMAD HAJI ADAM & CO. & ORS. (2019) 104 CCH 0391 MUMHC BY HOLDING THAT NO AD HOC ADDITION FOR BOGUS PURCHASES CAN BE MADE AND THAT T HE ADDITION SHOULD BE MADE TO THE EXTENT OF DIFFERENCE BETWEEN THE GROSS PROFIT RATE ON GENUINE PURCHASES AND GROSS PROFIT RATE ON HAWALA PURCHASES. WHEN WE TURN TO THE FACTS OF THE INSTANT CASE, IT TRANSPIRES THAT THE AO MADE AD HOC ESTIMATE AT 40% OF GRO SS PROFIT WITHOUT ANY BEDROCK AND THE ACTION OF LD. CIT(A) IN ENHANCING T HE ADDITION TO 100% OF BOGUS PURCHASES, IS ABSOLUTELY UNSUSTAINABLE. THE ASSESSEE CATEGORICALLY ADMITTED BEFORE THE AO FOR TAXATION TOWARDS ITA NO . 973 /PUN/ 201 9 M/S. SANKALP ENTERPRISES 4 ADDITIONAL GROSS PROFIT AT THE RATE OF 21.5 5%. CONSIDERING THE FACT THAT THE ADDITION CAN BE MADE ONLY TOWARDS THE ADDITIONAL COST , WE HOLD THAT THE PROFIT AT 21.55% AS OFFERED BY THE ASSESSEE, IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, IS REASONABLE TO COVER UP SUCH COST . WE, THEREFORE, DIRECT TO MAKE ADDITION AT THE RATE OF 21.55% OF THE AMOUNT OF BOGUS PURCHASES AT RS. 21,09,408 . 6 . IN THE RESULT, THE APPEAL IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE O PEN COURT ON 20 TH AUGUST , 2020 . SD/ - SD / - (R.S.SYAL) (S.S. VISWANETHRA RAVI) VICE PRESIDENT JUDICIAL MEMBER PUNE ; DATED : 20 TH AUGUST , 2020 GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A) - 8 , PUNE 4. 5. 6 . THE PR.CIT - 5 , PUNE , , DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER, / / TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NO . 973 /PUN/ 201 9 M/S. SANKALP ENTERPRISES 5 DATE 1. DRAFT DICTATED ON 20 - 0 8 - 2020 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 20 - 0 8 - 2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT CO MES 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 O RDER. *