Income Tax Appellate Tribunal - Mumbai
T.M. Mohamedally, Mumbai vs Ito Wd 18(3)(4), Kalyan on 4 September, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "D", MUMBAI
Before Shri P K Bansal, Vice President &
Shri Amarjit Singh, Judicial Member
ITA No. 3799/Mum/2016
Assessment Year : 2010-11
M/s. T M Mohamedally ITO Ward 18(3)(4)
Harharwala Bldg., 112 Lohar Chawl Mumbai
Crawford Market Vs.
Mumbai 400 002
PAN AACFT2448M
(Appellant) (Respondent)
Appellant By : None
Respondent By : Shri Purushottam Kumar
Date of Hearing : 31.08.2017 Date of Pronouncement : 04.09.2017
ORDER
Per P K Bansal, Vice-President:
This appeal has been filed by the assessee against the order of the CIT(A) - 29, Mumbai, dated 22.03.2016, for A.Y.2010-11. The only grievance of the assessee relates to the sustenance of the adhoc addition of ` 13,61,229/- by the CIT(A) against the addition made by the Assessing Officer amounting to ` 90,74,861/- on account of bogus purchases.
2. None appeared on behalf of the assessee even though notice was sent from time to time through RPAD. On 05.01.2017 the appeal was fixed, but none appeared and, therefore, hearing was adjourned to 02.03.2017. Again 2 ITA No.3799/Mum/2016 M/s. T M Mohamedally on 02.03.2017 none appeared and the case was adjourned to 29.03.2017 and thereafter to 18.07.2017. Today, on 31.08.2017 also none appeared on behalf of the assessee. We, therefore, decided to dispose of the appeal after hearing the learned DR and on the basis of the material available on record.
3. Brief facts of the case are that the assessee firm is carrying on the business of trading in hand tools, aircraft tools, refrigeration tools, automobiles tools, electronic and electrical toolkits, pneumatic tools, measuring tools, various industrial tools and hardware items. The assessee also has a branch at Kakinada, Hyderabad. During the year under consideration, the assessee has shown sales of ` 10,65,44,702/-, gross profit at ` 2,24,05,388/- and net profit at ` 17,04,000/- During the year, the Assessing Officer received information from the Sales Tax Department, the names of the parties who had admitted through sworn affidavits that they had been issuing hawala bills without actual sales and the assessee was one of the beneficiaries of these parties:
M/s. Samary Sales Corporation Rs. 2,55,000
M/s. Sunrise Enterprises Rs. 3,510
M/s. Kavish International Rs. 4,01,472
M/s. Nem Enterprises Rs. 26,20,887
M/s. A P Enterprises Rs. 30,37,579
M/s. Riddhi Associates Rs. 27,56,413
Rs. 90,74,861
Subsequently, proceedings u/s. 147 was initiated against the assessee. The Assessing Officer asked the assessee to prove the genuineness of the 3 ITA No.3799/Mum/2016 M/s. T M Mohamedally purchases being made from the aforesaid six parties. The assessee failed to do so and, therefore, the Assessing Officer treated the said purchases as bogus and added the same to the income of the assessee. When the matter went before the CIT(A), the CIT(A) relied on the following decisions:
i. Vijay Proteins Ltd. vs. ACIT 58 ITD 0428;
ii. Sun Pharmaceuticals Industries vs. DCIT 353 ITR 474
iii. N K Industries ltd. vs. ITO 362 ITR 542
He took a view that entire purchase price could not be disallowed but only the profit element embedded in such purchases could be added to the income of the assessee. He, therefore directed the Assessing Officer to restrict the disallowance to 15% of the alleged bogus purchases of ` 9,74,861/- i.e. at ` 13,61,229/-. Aggrieved, the assessee is in appeal before us.
3. We have heard the learned DR and perused the material available on record. The learned DR vehemently argued that the CIT(A) incorrectly deleted the addition. It was further argued that the entire disallowance made by the Assessing Officer should have been sustained by the CIT(A). The Assessing Officer treated the purchases made from six parties as stated hereinabove to be non-genuine. In our view, what is taxable is the taxable component and not the entire transaction. The Assessing Officer even though rejected the books of account has not estimated the profits except making the addition in respect of the said purchases. The disallowance of 4 ITA No.3799/Mum/2016 M/s. T M Mohamedally entire purchases from the six alleged hawala traders cannot be sustained in view of the decision of Mumbai High Court in CIT vs. Hariram Bhambhani in ITA 313/2013 decided on 04.12.2015, wherein it has been held that Revenue cannot bring the entire sales consideration to tax but only the profit attributable on the total unrecorded sales consideration, which alone can be subject to income tax. In our opinion, the estimation of the profit on the purchases @15% is on the high keeping in view that the assessee would have saved on VAT @12.5%. We set aside the order of the CIT(A) and direct the Assessing Officer to estimate the profit on the purchases of ` 90,74,861/- @ 12.5% and added it to the income returned by the assessee. Thus, the appeal filed by the assessee is partly allowed by modifying the order of the CIT(A) to that extent.
4. In the result, the appeal is partly allowed.
Order pronounced in the open court on 4th day of September, 2017.
Sd/- Sd/-
(Amarjit Singh) (P K Bansal)
JUDICIAL MEMBER VICE-PRESIDENT
Mumbai; Dated: 4th September, 2017
SA
5
ITA No.3799/Mum/2016
M/s. T M Mohamedally
Copy of the Order forwarded to :
1. The Appellant.
2. The Respondent.
3. The CIT(A),Mumbai
4. The CIT
5. DR, 'D' Bench, ITAT, Mumbai
BY ORDER,
#True Copy #
Assistant Registrar
Income Tax Appellate Tribunal, Mumbai