TMI Blog2021 (1) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... addition is made on estimate basis, penalty u/s 271 (1) (c) cannot be imposed. - Decided in favour of assessee. - ITA No. 3526/MUM/2019 And ITA No. 3527/MUM/2019 - - - Dated:- 28-10-2020 - Shri Shamim Yahya (AM) And Shri Ram Lal Negi (JM) For the Assessee : Shri Subodh Ratnaparkhi (AR) For the Revenue : Shri Jeetendra Kumar (DR) ORDER PER RAM LAL NEGI, JM These appeals have been filed by the revenue against the orders dated 20.03.2019 and 28.03.2019 passed by the Commissioner of Income Tax (Appeals)-26 (for short the CIT(A), Mumbai, for the assessment years 2010-11 and 2011-12. Vide order dated 20.03.2019, the Ld. CIT (A) has partly allowed the appeal filed by the assessee against the assessment order passed u/s 143 (3) r.w.s. 147 of the Act. Vide order dated 28.03.2019, the Ld. CIT (A) has allowed the appeal of the assessee filed against the order passed by the AO u/s 271 (1) (c) of the Income Tax Act, 1961 (for short the ct ) ITA No. 3526/MUM/2019 (Assessment Year: 2011-12) 2. Brief facts of the case are that the assessee engaged in the business of manufacturing of Gyro Screening Machines and its spares parts and other types of engineeri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary to the ratio laid down by the Hon ble Apex Court in the case of N.K. Protein Ltd. Vs. DCIT in SLP (Civil) No. 769/2017 the same is liable to be set aside. 5. On the other hand, the Ld. counsel for the assessee submitted that the facts of the cases relied upon by the revenue are different from the facts of the present case. The Ld. counsel further pointed out that the Hon ble Gujarat High Court in the case of CIT vs. Simit P. Sheth 356 ITR 451, the Hon ble Court has upheld the addition of 12.5% of alleged bogus purchases holding that the only profit element embedded in such purchases can be added to the income of the assessee. The Ld. counsel further submitted that since the findings of the Ld. CIT (A) are based on the ratio laid down by the Hon ble Gujarat High Court and the decisions of the jurisdictional Benches of the Tribunal. There is no infirmity in the order passed by the Ld. CIT (A) to interfere with. 6. We have heard the rival submissions of the parties and perused the material on record including the cases relied upon by the parties. As pointed out by the Ld. counsel, the Ld. CIT (A) has restricted the addition to 12.5% of the alleged bogus purchases by follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a situation, the various Courts including the Hon‟ble Gujarat High Court in the case of CIT vs Simit P. Sheth, 356 ITR 451 have held that not the entire purchases but only the profit element embedded in these purchases was to be disallowed and accordingly held that 12.5% of the purchases will be reasonable as profit on margin against the bogus purchases. In view of this decision of Hon‟ble ITAT H‟ Bench, Mumbai, the addition made by the AO is restricted to 12.5% of the total alleged bogus purchases of ₹ 13,83,676/- which should sufficiently cover the profit element embedded in the impugned purchases. The appellant‟s grounds of appeal are Partly Allowed. 7. Admittedly, in the present case the AO has not doubted the sales. As per the settled law, when sales are not doubted 100% disallowance cannot be made. Further, there cannot be any sale without actual purchases. In the present case, the assessee could not establish the genuineness of the transaction to the satisfaction of the AO. This does not mean that the assessee had not made any purchase. However, it can be concluded from the facts of the case that assessee had purchased the goods from gre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has levied penalty, only after verifying the fact that the assessee evaded the taxes on quantum of additions made on account of bogus purchases and the assessee failed to establish the genuineness of such purchases? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) was correct in holding that assessee has neither concealed the particulars of income nor has it furnished inaccurate particulars of income, there being are no findings of the A.O. that the details furnished by the assessee in his return are found to be inaccurate or erroneous or false without appreciating the fact that by resorting to bogus purchases/accommodation entry, the assessee made an attempt to reduce the profitability and thereby attempted to avoid taxes, which in itself proves beyond doubt that assessee concealed particulars of income.? 3. Before us, the Ld. DR submitted that since the assessee failed to establish the genuineness of the purchases in question by adducing cogent and convincing evidence, AO had rightly made addition of the total amount of bogus purchases to the income of the assessee. Even in the first appeal, the Ld. CIT (A) sustained the addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at where additions are made on estimation, no penalty u/s. 271(1)(c) is leviable, there being no concealment of particulars of income or furnishing of inaccurate particulars of income. In the present case, the purchase had been duly shown by the appellant in its books of accounts but it could not produce the party from whom the purchase had been made. It is not the case of the AO that the impugned purchases have been proved to be bogus conclusively and there were no corresponding sales. In a recent case before the Allahabad High Court in the case of Naresh C hand Agarwal vs. CIT. 357 ITR 0514 (All), it has been held that: 12. In the instant case, nothing was concealed by the assessee. The A. O. has rejected the books of account in the second round and applied the 8 percent net profit rate prescribed under Section 44 AD. in the instant case, the turnover is more than 40 lacs, so Section 44 AD is not applicable, nonetheless the A. 0. has inspired with the provision of Section 44 AD and made the addition by estimating the net profit rate at 8 percent. Rejection of the books of account allowed the A. 0. to make the addition on estimate basis. When the addition is made on estimate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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