Income Tax Appellate Tribunal - Mumbai
Shri. Abhishek Vimalchand Jain, Mumbai vs Ito 20(1)(1), Mumbai on 22 January, 2020
IN THE INCOME TAX APPELLATE TRIBUNAL "SMC", BENCH MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER ITA No.282/Mum/2019 (Assessment Year: 2010-11) Shri Abhishek Vimalchand Vs. I.T.O. 20(1)(1) Jain, Mumbai.
A201, Vikas Apaertment,
Dadabhai Chamar Baug
Road, Parel, Mumbai-
400012.
PAN/GIR No. ADEPJ 9316 M
(Appellant) .. (Respondent)
Assessee by Shri Vimal Punmiya (AR)
Revenue by Shri Akhtar H Ansari (DR)
Date of Hearing 21/01/2020
Date of Pronouncement 22/01/2020
आदे श / O R D E R
PER: R.C. SHARMA, A.M.
This appeal by the assessee is directed against the order dated 18/10/2018 of ld. CIT(A)-32, Mumbai for the A.Y. 2010-11 in the matter of order passed u/s 143(3) of the Income Tax Act, 1961 (in short, the Act).
2. The solitary grievance of the assessee relates to addition of 25% in respect of alleged bogus purchases made by the A.O.
3. Rival contentions have been heard and record perused. The facts in brief are that the assessee is engaged in the business of trading of liquor. During the course of scrutiny assessment, the A.O. found that the 2 ITA No. 282/Mum/2019 Shri Abhishek Vimalchand Jain Vs ITO assessee has taken bogus purchase bills without delivery of actual goods as per the information received from the DGIT(Inv.),Mumbai. With regard to alleged bogus purchases, the A.O. made addition by estimating profit @ 25% of such alleged bogus purchases which was confirmed by the ld. CIT(A), against which the assessee is in further appeal before the ITAT.
4. At the outset, the ld AR of the assessee has contended that the issue with regard to extent of addition in case of bogus purchases is covered by the decision of the Hon'ble Jurisdictional High Court in the case of Pr.CIT Vs M/s Mohommad Haji Adam & Co. in ITA No. 1004 of 2016 order dated 11/02/2019, according to which addition can be made only to the extent of difference between the G.P. declared in respect of alleged bogus purchases vis a vis G.P. declared in respect of normal purchases.
5. On the other hand, the ld DR has relied on the orders of the authorities below and contended that the assessee could not establish genuineness of purchases, therefore, the A.O. was justified in making addition by estimating profit @ 25% on the same.
6. I have considered the rival contentions and carefully gone through the orders of the authorities below and found that the addition has been made by the A.O. by estimating profit of 25% on the purchases alleged 3 ITA No. 282/Mum/2019 Shri Abhishek Vimalchand Jain Vs ITO to be bogus as per information received from the Sales Tax Department through DGIT(Inv.), Mumbai. After considering all the facts, the A.O. made addition of Rs. 17,43,885/- being 25% of alleged purchases and the ld. CIT(A) confirmed the addition made by the A.O. being 25% of alleged purchases of Rs. 69,75,542/-. From the record, I found that before the lower authorities, the assessee has submitted following documents/information and informations:
1. All bills of purchases with delivery challans
2. All payment made thought account payee cheque.
3. Supplier provided all identity to bank following KYC Norms.
4. All sales of assessee were accepted.
5. Without Purchases sales cannot take place.
6. Assessee accounts duly Audited by Tax Auditor and VAT Auditor.
7. Delivery Challan of all purchases are duly maintained.
8. Assessee purchases are sold to customers and balance are lying as closing stock.
9. Assessee purchases are sold to customers and correlation given by assessee.
10. A l l p u r c h a s e s b il l s a l so h a d s ho w n VA T A m o u n t w h i c h i s d u l y p aid b y assessee to supplier.
11. Vat is paid by us to the Maharashtra Government.
12. There is no evidence than cash received back by assessee.
13. Assessing officer made allegation that assessee reduced true profit through alleged purchases. If the assessing officer contention is accepted than it will lead to unexpected GP which will be unpractical.4 ITA No. 282/Mum/2019
Shri Abhishek Vimalchand Jain Vs ITO I found that the A.O. merely relied on the information from the Sales Tax Department. Thus, I found that the addition has been made merely by relying on the information from Sales Tax Department, corresponding purchases has not been doubted nor books of account of were rejected. With respect to issue regarding addition in respect of bogus purchases, the Hon'ble Jurisdictional High Court in the case of Pr.CIT Vs M/s Mohommad Haji Adam & Co. in ITA No. 1004 of 2016 vide its order dated 11/02/2019 have held as under:
"8. In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assesses additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the a s s e s s e e ' s s a l e s . T h e r e w a s n o d i s c r e p a n c y b e t w e e n t h e purchases shown by the assessee and the sales declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd.. (supra) cannot be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under-5 ITA No. 282/Mum/2019
Shri Abhishek Vimalchand Jain Vs ITO So far as the question regarding addition of Rs.3,70,78,125/- as gross profit on sales of Rs.37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books durin Financial Year 1997- 98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit conies to 5.66%. Therefore, considering 5.66 % of Rs.3,70,78,125/which comes to Rs.2098.62 1.88 we think it fit to direct the revenue to add Rs.20,98.621.88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue."
7. The Coordinate Bench of the ITAT, Mumbai in the case of Shri Rameshkumar Daulatraj Vs ITO in ITA No. 4192/Mum/2018 order dated 07/05/2019 has held as under:
"9. When these facts were confronted to the learned Sr. DR, he requested for application of reasonable profit rate and according to him the profit rate applied by the AO and confirmed by CIT(A) is quite reasonable in view of the decision of Hon'ble Gujarat High court in the case of Smith P.Seth (supra). We have considered the rival contentions ITA No. 4192/Mum/2018 and are of the view that Hon'ble Bombay High Court in the case of Mohammad Haji Adam & Co. and Ors. (supra) has considered this issue and respectfully following the same, we direct the AO to restrict the profit rate only to the extent of differential percentage as declared on the bogus purchases and as declared on the regular purchases, Hence, we direct the AO accordingly."
8. Considering the above decision of the Hon'ble Bombay High Court, the addition is to be confined to the difference of G.P. rate declared in respect of genuine purchases vis a vis bogus purchases. In the instant 6 ITA No. 282/Mum/2019 Shri Abhishek Vimalchand Jain Vs ITO case, I found that on normal purchases, the assessee has declared G.P. at 5.10% whereas on bogus purchases, the assessee has declared G.P. @ 4.05%, thus, the difference in gross profit works out to be 1.05%. Respectfully following the proposition of law as laid down by the Hon'ble Jurisdictional High Court, I direct the A.O. to restrict the addition by applying gross profit rate of 1.05% in place of 25% as made by the A.O. I direct accordingly.
9. In the result, appeal of the assessee is allowed in part.
Order pronounced in the open court on 22nd January, 2020.
Sd/-
(R.C.SHARMA)
ACCOUNTANT MEMBER
Mumbai; Dated 22/01/2020
*Ranjan
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
स या पत त //True Copy// BY ORDER,
(Asstt. Registrar)
ITAT, Mumbai