Income Tax Appellate Tribunal - Mumbai
Mehta Infocom P.Ltd, Mumbai vs Ito Wd 9(2)(3), Mumbai on 17 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL"B" BENCH, MUMBAI
BEFORE SHRI RAJENDRA, AM AND SHRI AMARJIT SINGH, JM
आयकरअपीलसं /I.T.A. No.6917/M/2014
(निर्धारणवर्ा / Assessment Year: 2010-11)
Mehta Infocom P. Ltd. बिधम/ ITO WD 9(2) (3)
Mehta House, Plot No. AF/3 Vs.
Aayakar Bhavan, M.K.
Cama Indl Estate, Near Hub
Road
Mall, Off W.E. Highway
Goregaon (E) Mumbai - 400020
Mumbai - 400063
स्थायीले खासं ./जीआइआरसं ./PAN/GIR No. : AAFCM2000E
(अपीलाथी/Appellant) .. (प्रत्यथी /Respondent)
Assessee by: Shri Sanjiv M. Shah (AR)
Department by: Shri Abani Kanta Nayak (DR)
सुनवाईकीतारीख / Date of Hearing:28.04.2017
घोषणाकीतारीख /Date of Pronouncement:. 17. 07.2017
आदे श / O R D E R
PER AMARJIT SINGH, JM:
This is an appeal filed by the assessee against the order dated 21.08.2014 passed by the Commissioner of Income Tax (Appeals)-20, Mumbai [hereinafter referred to as the "CIT(A)"] relevant to the assessment year 2010-11.
2. The assessee has raised the following grounds:-
"1.1 On the facts and in law, the Ld. CIT(A) erred in confirming the disallowance of purchases of Rs.4,07,408 from the parties as bogus Mehta Infocom P. Ltd.
purchases on the basis of information received from the sales tax department without appreciating the fact that appellant is a trader, stock records are maintained, chart showing corresponding sales against the alleged purchases was produced and the payments for purchases were made to the alleged parties by account payee cheques.
1.2 On the facts and in law and without prejudice to ground nos. 1.2 the Ld. CIT(A) erred in not accepting the ground of disallowing GROSS PROFIT without appreciating the facts that appellant is a trader for every sale there has to be a corresponding purchase and stock register is maintained by appellant.
2. Appellant prays for leave to add, amend or delete any grounds. For appeal on or before the final date of hearing."
3. The brief facts of the case are that the assessee company filed e- return of income for the A.Y. 2010-11 on 04.10.2010 declaring total income to the tune of Rs.27,74,144/-. The return was processed u/s 143(1) of the I.T. Act, 1961. Subsequently, the case was selected for scrutiny and notice u/s 143(2) of the Act dated 02.09.2011 was issued and served upon the assessee. Thereafter, the notice u/s 142(1) of the Act dated 07.06.2012 was also issued and served upon the assessee. The assessee company is engaged in the business of trading and dealing in cables and internet related products. The DDIT (Inv.) Unit- 2(4) informed by virtue of letter dated 13.03.2013 that the assessee company was availing accommodation entries from M/s Mehta infocom P. Ltd. The following entries were identified.-
F.Y Details M/s Mehta Infocom P. Ltd
4658583
2
Mehta Infocom P. Ltd.
2008- Bogus Purchase 407408
09
185850
2009-
10
2010- 12500000
11
2009- Unaccounted income introduced as share capital premium 10 Total 1,77,51,841
4. Thereafter, the notice was given and after getting reply an amount of Rs.4,07,408 was added to the income of the assessee and the income to the assessee was assessed to the tune of Rs.1,68,64,580/-. The assessee filed an appeal before the CIT(A) who confirmed the said addition therefore, the present appeal has been field before us.
ISSUE NO.1.1 to 1.2:-
5. At the very outset the Ld. representative of the assessee has argued that the disallowance of purchase expenses to the tune of Rs.4,07,408/- is wrong against the law and facts and is liable to be set aside. It is also argued that the payment was made through account payee cheques which is supported by receipt and the appellant has also given the VAT therefore, the appellant has discharged his onus with regard to the genuineness of the purchase but the Assessing 3 Mehta Infocom P. Ltd.
Officer has wrongly disallowed the purchase therefore, the finding of the CIT(A) in this regard is not liable to be sustainable in the eyes of law. It is also argued that the sale is not disputed and the books of account has not been rejected, therefore, in the said circumstances the addition of an amount of Rs.4,07,408/-regarding bogus purchase is wrong and against the law and facts and is liable to be set aside. It is also alternatively argued that the gross profit of the bogus purchase may kindly be taken into consideration for the assessment of tax in view of the law settled in CIT Vs. Simit P Sheth Hon'ble Gujarat High Court dated 16.01.2013 in ITA. No. 553 of 2013. On the other hand, the Ld. representative of the department has refuted said contentions. We have heard the arguments advanced by the Ld. representative of the parties and perused the record. The case of the assessee was reopened on the basis of the letter dated 13.03.2013 received from DDIT(Inv.) Unit-2(4), Mumbai along with enquiry proceeding u/s 131 of the Act in the case of Mehta Group in which M/s. Mehta Infocom P. Ltd. is one of the group concern. In the enquiry, the transaction of the assessee company was examined and it was found that the assessee availed the accommodation entries in the form of purchase and also share capital to the tune of Rs.4,07,408/- relating to three parties which were found as bogus. However, the enquiry was conducted by Sales Tax Department of Maharashtra in which these parties admitted these facts that they were issuing the bogus bills. Subsequently, the Assessing Officer went to the address 4 Mehta Infocom P. Ltd.
of these parties and the said parties were not found therefore, the assessee was asked to prove the transactions. The assessee failed to produce these parties but relied upon the documents available with him such as ledger account and purchase payment made through the banking channels etc. The said evidence was not considered by AO because of the manipulation anyhow we found that no opportunity of being heard was granted to the assessee to cross-examine the person whose statement was recorded by the Sales Tax Department of Maharashtra and no books of account has not been rejected so in such type of cases Gujarat High Court has passed the order wherein it has been held that the gross profit ratio is liable to be taken on the bogus purchase. If any, in the case of CIT Vs. Simit P Sheth(supra). In view of the said law, we are of the view that the addition of the total bogus purchase into the income of the assessee is not justifiable and the only element which is liable to be added is the ratio of gross profit. Accordingly, we found it justifiable to add the income @ of 12.5% of the bogus purchase. In this regard we also find of support of the decision of the jurisdictional High Court in the case of CIT Vs. Hariram Bhambhani, ITA No.313 of 2013, Feb 4, 2015 (2015) 92 CCH 0046 Mumbai High Court). In view of the said circumstances, we are of the view that the finding of the CIT(A) on this issue is not justifiable therefore, we set aside the same and hold that the profit ratio @ of 12.5% of the purchase to the tune of Rs.4,07,408/- is liable to be taken into consideration in the income of the assessee.
5Mehta Infocom P. Ltd.
Accordingly, we decide this issue in favour of the assessee against the revenue.
6. In the result, appeal of the assessee is hereby allowed.
Order pronounced in the open court on 17.07 .2017 Sd/- Sd/-
(RAJENDRA) (AMARJIT SINGH) लेखासदस्य / ACCOUNTANT MEMBER न्याययकसदस्य/JUDICIAL MEMBER मुंबई Mumbai; यदनां कDated : 17 .07.2017 v.p.singh
आदे शकीप्रनिनिनिअग्रेनर्ि/Copy of the Order forwarded to :
1. अपीलाथी/ The Appellant
2. प्रत्यथी/ The Respondent.
3. आयकरआयु क्त(अपील)/ The CIT(A)-
4. आयकरआयु क्त/ CIT
5. यवभागीयप्रयतयनयि,आयकरअपीलीयअयिकरण, मुंबई/ DR, ITAT, Mumbai
6. गार्ड फाईल /Guard file.
आदे शधिुसधर/ BY ORDER, सत्यायपतप्रयत //True Copy// उि/सहधयकिंजीकधर (Dy./Asstt.Registrar) आयकरअिीिीयअनर्करण, मुंबई / ITAT, Mumbai 6