MITAL POLYPLAST PVT LTD,MUMBAI V. ITO WARD 2(2)(3), MUMBAI

ITA 109/MUM/2025

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The case involves Mital Polyplast Pvt. Ltd., which appealed against the orders of the National Faceless Appeal Centre (NFAC), Delhi, concerning additions made to their income for the Assessment Years 2009-10 and 2010-11. The additions were based on the AO's findings that the assessee had made bogus purchases from parties listed as Hawala operators. The Tribunal examined the evidence presented by both the assessee and the AO, including the documentation of transactions and the credibility of the suppliers. The Tribunal concluded that the AO had not adequately substantiated the claim of bogus purchases and that the assessee had maintained proper records and conducted genuine business transactions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312768 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Other Referred Cases: M/s. Vijay Proteins Ltd. (1996 58 ITD 428 Ahd)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.K. MAKWANA
• Assessee Lawyers: M. S. MATHURIA
• Keywords: Bogus purchase; Onus to prove; Bogus
• Section: 143(3); 133(6); 69C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER MS. PADMAVATHY S, ACCOUNTANT MEMBER आयकरअपील सं./ ITAs No.108 & 109/Mum/2025 (िनधाŊरणवषŊ / Assessment Years: 2009-10 & 2010-11) Mital Polyplast Pvt. Ltd., 22, Gami House, Modi Street, Fort, Mumbai - 400001 बनाम/ Vs. ITO, Ward – 2(2)(3) 542, Aayakar Bhavan, M.K. Road, Mumbai- 400020 ̾थायीलेखासं./जीआइआरसं./PAN No. AADCM8149C (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎकीओरसे/ Appellant by : Shri M.S. Mathuria ŮȑथŎकीओरसे/Respondent by : Shri R.K. Makwana, Addl.CIT सुनवाईकीतारीख/ Date of Hearing : 16.04.2025 घोषणाकीतारीख / Date of Pronouncement : 29.04.2025 आदेश / O R D E R PER AMIT SHUKLA, JUDICIAL MEMBER: The aforesaid appeals have been filed by the assessee, against the order passed by National Faceless Appeal Centre (NFAC), Delhi [“learned CIT(A)”] of even date 18.11.2024 for the quantum of 2 ITAs No. 108 & 109/Mum/2025 assessment passed u/s 143(3) r.w.s. 147, for the Assessment Year (A.Y.) 2009-10. 2. In both the years, the assessee has challenged the addition of Rs.72,35,329/- for A.Y. 2009-10 and Rs.1,08,51,009/- for A.Y. 2010-11, sustained by the learned CIT(A) on account of bogus purchases by applying the peak of aggregate purchases made from alleged parties who were in the list of Hawala Operators. 3. The brief facts of the case are that the assessee-company is engaged in the business of trading of polyplast, computer materials and other commercial products. The return of income was filed on 30.09.2009, declaring total income of Rs.2,82,300/-. The said return was accepted and processed under section 143(1). Thereafter, the assessee’s case was reopened on the basis of information received from DGIT (Inv.) that the assessee is involved in bogus purchases and AO formed an opinion that the income of Rs.1,69,02,364/- has escaped assessment. In the reasons recorded, the AO noted that there is a list of Hawala Operators, identified by the Sales Tax Department and information has been shared with the office of DGIT (Inv.), Mumbai and it was intimated that assessee 3 ITAs No. 108 & 109/Mum/2025 has taken bogus purchases from 7 parties for sums aggregating to Rs.1,69,02,364/-. In response, the assessee submitted the brief note of business / trading activities, copy of profit and loss account, balance-sheet with annexure of Audit Report, details of bank account and statement reflecting the payments, ledger account of the purchaser parties with bank statements, copies of purchase bills, etc. The learned AO held that invoices furnished by the assessee cannot be treated as genuine as these concerned parties have been found to be issuing bills without actually selling any material by the Sales Tax Authorities. Apart from that he has stated that no transport receipts or lorry receipts have been submitted. Further, he has noted that payments made through banking channel have not been provided and suppliers were not present at the addresses furnished by the assessee and further these parties have admitted before the Sales Tax Authority that they have only provided accommodation bills and assessee has failed to produce the suppliers. Thus, burden of proof has not been established by the assessee. Thereafter, he has made an addition by applying a peak, after observing and holding as under: 4 ITAs No. 108 & 109/Mum/2025 “4.9: I am therefore of the considered opinion that the transactions in respect of the material shown as purchases by the assessee from the above mentioned parties are not genuine transactions. It is reasonably clear and glaringly obvious that the sales invoices claimed to have been issued by them are fictitious ones. Therefore applying the ratio of decision in the case of M/s. Vijay Proteins Led. (1996 58 ITD 428 Ahd) peak of such purchases or 25% of such purchases whoever is higher is required to be disallowed. During the course of assessment proceedings, on the basis of information given, the peak has been calculated @ Rs.72,35,329/-The working has been enclosed as per annex \"A\" which is part of assessment. For the year under consideration 25% of the purchases comes at Rs. 42,25,591/-applying the ratio of Vijay Proteins Ltd. The higher amount comes Rs. 72,35,329/- as Peak and same is added to the total income u/s. 69C of the I.T. Act.” 4. The learned CIT(A) has confirmed the action of the AO after observing as under: “4.2 The appellant was asked to deposit evidence in respect of delivery of goods i.e., delivery challan, transport receipts/lorry receipts, relevant entries in the stock register etc. The Ld. AO has specifically noted in the order that the appellant failed to produce the suppliers before the Ld. AO, also failed to produce brokers/third party evidence in spite of opportunities granted. Also, no transport receipts or lorry receipts or octroi receipts were submitted. 4.3 Under the appeal, the appellant has, inter alia, produced bankstatements, copy of ledger account, in the books of the appellant; copies of tax invoices with delivery chalans; however, no reason has been given as to why the same was not produced before the Id. AO. The stock register was said to be unavailable. 4.4 The test of evidence in income tax proceedings is that of preponderance of probability. The legal principles laid down in a number of cases are squarely applicable to the facts and circumstances of the present case. It is obvious from these judicial decisions that - • Mere documentary evidences are not sufficient to establish the genuineness of transactions in all situations. 5 ITAs No. 108 & 109/Mum/2025  Documents must also stand the tests of human conduct, surrounding circumstances and preponderance of probability. • When surrounding circumstances and attending facts predicate a cover-up, the taxing authorities cannot put on blinkers while looking at documents but are required to go beyond documents to look into surrounding circumstances to segregate the real from apparent. 4.5 In the light of aforementioned discussion and in the light of the fact that suppliers themselves have admitted having made bogus entries, I am of the view that there is a strong burden on the appellant to prove that entries related to them were not bogus. The appellant has failed to discharge that burden. In today's time hawala operators work in a very sophisticated manner and create documentary evidence to make it look genuine. In such circumstances, tax authorities need to look deeper. In the present case, the Id. AO had asked for the stock register which the appellant failed to produce. Most of the documents submitted with appeal were not produced before the Id. AO and no reason has been assigned as to why the same could not be produced before the Id. AO. In such circumstances, I am not inclined to interfere with the order of the Ld. AO. All the grounds are dismissed as devoid of merit.” 5. Before us, the learned counsel submitted that the assessee during the course of the assessment proceedings have produced copy of ledger account, tax invoices, it contained the details of materials purchased from the parties along with entire description with VAT and GST numbers, photocopy of cheques issued for the purchase of materials, copy of bank statement for which payments were made, confirmation from the parties from whom assessee had made purchases. The list of these documents have been furnished from pages 59 to 282 of the paper book. It was further submitted 6 ITAs No. 108 & 109/Mum/2025 total purchase were of Rs.6,20,78,257/- and the purchases from alleged suspicious suppliers were of Rs.1,69,02,364/-. The entire purchases were reflected in the books of account and the payments have been made from the account payee cheques and the corresponding sale of the same quantity has been accepted by the AO. Thus, the trading account including sales, gross profit and net profit have not been disputed. Apart from that every invoice describes the delivery and details of delivery challan and this fact has been stated clearly before CIT(A). 6. On the other hand, learned DR strongly relied upon the order of the CIT(A) and submitted that once it has been found that assessee made purchases from bogus Hawala Operators and assessee could not produce the suppliers nor they were found to be existing in the given address as mentioned by the AO, the purchases cannot be held to be genuine. 7. In a short rejoinder, the learned counsel submitted that no such notices have been issued under section 133(6) and this fact has never been communicated by the AO that these suppliers were never found in the given address as per the invoices. 7 ITAs No. 108 & 109/Mum/2025 8. We have heard the rival submissions and also perused the relevant material placed on record. It is seen that assessee for proving genuineness of the purchases have filed following documents with regard to all these parties which has been incorporated in the order of the CIT(A) which for the sake of ready reference is reproduced under: “1. Nandkishore Sales Agency Pvt. Ltd. : 1. Its PAN is AACCN6055H - Assessable by ITO 5(2)(1): 2. Said company incorporated on 15.10.2007; 3. CIN: U51420MH2007PTC175023 under the Companies Act, 1957 4. Copy of ledger account of said Nandkishore Sales Agency Pvt. Ltd., in the books of the appellant; 5. Copies of Tax Invoices with delivery chalans, 6. Copies of cheques issued by the appellant in favour of said Nandkishore Sales Agency Pvt. Ltd., showing name of the Bank of said Nandkishore Sales Agency Pvt. Ltd., through which said cheques are cleared; 7. Copies of bank statement of the appellant showing said cheque amounts debited by their bank 8. Copy of ledger account of appellant in the books of said Nandkishore Sales Agency Pvt. Ltd., 1. Copies of ledger account, Tax Invoices with delivery chalans, cheques issued by the appellant in favour of said Nandkishore Sales Agency Pvt. Ltd., showing name of the Bank of said Nandkishore Sales Agency Pvt. Ltd., through which said cheques are cleared; bank statement of the appellant showing said cheque amounts debited by their bank and ledger account of appellant in the books of 8 ITAs No. 108 & 109/Mum/2025 said Nandkishore Sales Agency Pvt. Ltd. are attached herewith and collectively marked as EXHIBIT \"D\". 2. Vitrag Traders Pvt. Ltd., 1. Its PAN is AACCV5487D - Assessable by ITO 5(3)(3); 2. Said company incorporated on 12.09.2007; 3. CIN : U51420MH2007PTC1744064 under the Companies Act, 1957 4. Copy of ledger account of said Vitrag Traders Pvt. Ltd., in the books of the appellant; 5. Copies of Tax Invoices with delivery chalans; 6. Copies of cheques issued by the appellant in favour of said Vitrag Traders Pvt. Ltd., showing name of the Bank of said Vitrag Traders Pvt. Ltd., through which said cheques are cleared: 7. Copies of bank statement of the appellant showing said cheque amounts debited by their bank 8. Copy of ledger account of appellant in the books of said Vitrag Traders Pvt. Ltd., 1. Copies of ledger account, Tax Invoices with delivery chalans, cheques issued by the appellant in favour of said Vitrag Traders Pvt. Ltd., showing name of the Bank of said Vitrag Traders Pvt. Ltd., through which said cheques are cleared; bank statement of the appellant showing said cheque amounts debited by their bank and ledger account of appellant in the books of said Vitrag Traders Pvt. Ltd., are attached herewith and collectively marked as EXHIBIT \"E\". 3. Sangura Trading Pvt. Ltd., 1. Its PAN is AAJCS8160R - Assessable by ITO 7(2)(2); 2. Said company incorporated on 10.04.2006; 3. CIN: U51900MH2006PTC161057 under the Companies Act, 1957 4. Copy of ledger account of said Sangura Trading Pvt. Ltd., in the books of the appellant; 9 ITAs No. 108 & 109/Mum/2025 5. Copies of Tax Invoices with delivery chalans; 6. Copies of cheques issued by the appellant in favour of said Sangura Trading Pvt. Ltd., showing name of the Bank of said Sangura Trading Pvt. Ltd., through which said cheques are cleared; 7. Copies of bank statement of the appellant showing said cheque amounts debited by their bank. 8. Copy of ledger account of appellant in the books of said Sangura Trading Pvt. Ltd., 1. Copies of ledger account, Tax Invoices with delivery chalans, cheques issued by the appellant in favour of said Sangura Trading Pvt. Ltd., showing name of the Bank of said Sangura Trading Pvt. Ltd., through which said cheques are cleared; bank statement of the appellant showing said cheque amounts debited by their bank and ledger account of appellant in the books of said Sangura Trading Pvt. Ltd., are attached herewith and collectively marked as EXHIBIT \"F\". 4. U. V. Distributors Pvt. Ltd., 1. Its PAN is AAACU8942L - Assessable by ITO 5(3)(3); [b| Said company incorporated on 18.04.2007; 1. CIN : U51909MH2007PTC170057 under the Companies Act, 1957 1. Copy of ledger account of said U. V. Distributors Pvt. Ltd., in the books of the appellant; 2. Copies of Tax Invoices with delivery chalans; 3. Copies of cheques issued by the appellant in favour of said U. V. Distributors Pvt. Ltd., showing name of the Bank of said U. V. Distributors Pvt. Ltd., through which said cheques are cleared; 4. Copies of bank statement of the appellant showing said cheque amounts debited by their bank [hj Copy of ledger account of appellant in the books of said U.V. Distributors Pvt. Ltd., 1. Copies of ledger account, Tax Invoices with delivery chalans, cheques issued by the appellant in favour of said U. V. Distributors 10 ITAs No. 108 & 109/Mum/2025 Pvt. Ltd., showing name of the Bank of said U. V. Distributors Pvt. Ltd., through which said cheques are cleared; bank statement of the appellant showing said cheque amounts debited by their bank and ledger account of appellant in the books of said U. V. Distributors Pvt. Ltd., are attached herewith and collectively marked as EXHIBIT UG\". 5. Remi Trading Co. Pvt. Ltd., 1. Its PAN is AADCR7441L - Assessable by ITO 5(3)( 1); 2. Said company incorporated on 12.07.2007; 3. C1N: U51101MH2007PTC174971 under the Companies Act, 1957 [dj Copy of ledger account of said Remi Trading Co. Pvt. Ltd., in the books of the appellant; 1. Copies of Tax Invoices with delivery chalans; [t] Copies of cheques issued by the appellant in favour of said Remi Trading Co. Pvt. Ltd., showing name of the Bank of said Remi Trading Co. Pvt. Ltd., through which said cheques are cleared; 1. Copies of bank statement of the appellant showing said cheque amounts debited by their bank 2. Copy of ledger account of appellant in the books of said Remi Trading Co. Pvt. 1. Copies of ledger account, Tax Invoices with delivery chalans, cheques issued by the appellant in favour of said Remi Trading Co. Pvt. Ltd., showing name of the Bank of said Remi Trading Co. Pvt. Ltd., through which said cheques are cleared; bank statement of the appellant showing said cheque amounts debited by their bank and ledger account of appellant in the books of said Remi Trading Co. Pvt. Ltd., are attached herewith and collectively marked as EXHIBIT \"H\". 6. Newspark Trading Co. Pvt. Ltd. 1. Its PAN is AACCN1443M- Assessable by ITO 5(2)(1); 2. Said company incorporated on 08.06.2005; 3. CIN : U51909MII2005PTC153846 under the Companies Act, 1957 11 ITAs No. 108 & 109/Mum/2025 4. Copy of ledger account of said Newspark Trading Co. Pvt. Ltd., in the books of the appellant; 5. Copies of Tax Invoices with delivery chalans; [1] Copies of cheques issued by the appellant in favour of said Newspark Trading Co. Pvt. Ltd., showing name of the Bank of said Newspark Trading Co. Pvt. Ltd., through which said cheques are cleared; 1. Copies of bank statement of the appellant showing said cheque amounts debited by their bank 2. Copy of ledger account of appellant in the books of said Newspark Trading Co. Pvt. Ltd., 1. Copies of ledger account, Tax Invoices with delivery chalans, cheques issued by the appellant in favour of said Newspark Trading Co. Pvt. Ltd., showing name of the Bank of said Newspark Trading Co. Pvt. Ltd., through which said cheques are cleared; bank statement of the appellant showing said cheque amounts debited by their bank and ledger account of appellant in the books of said Newspark Trading Co. Pvt. Ltd., are attached herewith and collectively marked as EXHIBIT \"4\". 7. Riva Trading Co. Pvt. Ltd., 1. Its PAN is AADCR7194M - Assessable by ITO 5(3)(1); 2. Said company incorporated on 20.09.2007; (e] CIN: U51420MH2007PTC174349 under the Companies Act, 1957 1. Copy of ledger account of said Riya Trading Co. Pvt. Ltd., in the books of the appellant; 2. Copies of Tax Invoices with delivery chalans; 3. Copies of cheques issued by the appellant in favour of said Ria Trading Co. Pvt. Ltd., showing name of the Bank of said Riya Trading Co. Pvt. Ltd., through which said cheques are cleared; 4. Copies of bank statement of the appellant showing said cheque amounts debited by their bank 12 ITAs No. 108 & 109/Mum/2025 5. Copy of ledger account of appellant in the books of said Riya Trading Co. Pvt. Ltd., 1. Copies of ledger account, Tax Invoices with delivery chalans, cheques issued by the appellant in favour of said Riya Trading Co. Pvt. Ltd., showing name of the Bank of said Riya Trading Co. Pvt. Ltd., through which said cheques are cleared; bank statement of the appellant showing said cheque amounts debited by their bank and ledger account of appellant in the books of said Riya Trading Co. Pvt. Ltd., are attached herewith and collectively marked as EXHIBIT I\".” 9. All these documents have also been furnished before us. From the aforesaid documents, it is seen that apart from the ledger account of the parties, assessee has also filed tax invoice, which includes delivery challan to prove that these purchases were delivered to the assessee. Secondly, the payments have been made through account payee cheques from the bank account of the assessee which has been cleared and the corresponding quantity and value of the purchases have been duly incorporated in the books of account. Another important fact is that corresponding quantity of sales and value have been duly disclosed and the corresponding sales and the gross profit has been accepted by the AO. The party has also filed confirmed ledger account of the assessee along with tax invoices and delivery challan. The entire premise of the AO is simply based on the report of the Investigation Wing that these parties were listed as Hawala Operators. Nowhere 13 ITAs No. 108 & 109/Mum/2025 only material has been brought on record that these parties were actually examined and they have stated that they have provided only hawala bills to the assesseee without making any actual sales and have simply issued the sale bills. If AO is relying on such information, then at least he should have in his possession as to, whether these parties have categorically stated that the assessee was provided accommodation bill or they were not doing any genuine business. In case of purchase, the assessee can only establish the documents like bills / tax invoices, delivery challan, payment made through cheques, the source of which are duly incorporated in the books of account, copy of bank statements and most importantly the quantity of purchases have been duly debited to the books of account and there is a corresponding sales. Without the purchase of same quantity, the sales cannot be affected. AO has disturbed the trading results nor rejected the books of account. In this case, AO has not treated the entire purchases as bogus, albeit has applied peak of purchases or applied G.P. of 25% on ad-hoc basis on the said purchases. Thus, he himself is not treating the entire purchases as bogus. The manner in which the addition has been made by the AO cannot be sustained simply relying on the 14 ITAs No. 108 & 109/Mum/2025 information received from Sales Tax Authorities and without examining the documents and evidences filed before him. Accordingly, we hold that the entire addition made by the AO on account of purchases are deleted. 10. Since similar facts are permeating in A.Y. 2010-11 wherein addition has been made by the AO by applying peak of Rs.1,08,51,009/- aggregate purchase of Rs.2,06,05,871/- from same very parties. Our finding given in the appeal in ITA No.108/Mum/2025 will apply mutatis mutandis in this appeal also. Accordingly, the addition made by the AO is deleted. 11. In the result, both the appeals filed by the assessee are allowed. Orders pronounced in the open court on 29th April, 2025. Sd/- Sd/- (Ms. Padmavathy S.) (Amit Shukla) Accountant Member Judicial Member मुंबई Mumbai;िदनांक Dated : 29.04.2025 Prabhat 15 ITAs No. 108 & 109/Mum/2025 आदेशकीŮितिलिपअŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकरआयुƅ(अपील) / The CIT(A) 4. आयकरआयुƅ/ CIT- concerned 5. िवभागीयŮितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 6. गाडŊफाईल / Guard File आदेशानुसार/ BY ORDER, .उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, मुंबई/ ITAT, Mumbai "