Income Tax Appellate Tribunal - MumbaiM/S Boss Infosolutions Pvt Ltd, Mumbai vs Ito Ward 12(1)(3), Mumbai on 20 December, 2021IN THE INCOME TAX APPELLATE TRIBUNAL\n                              "SMC" Bench, Mumbai\n                  Before Shri Shamim Yahya, Accountant Member\n\n                               I.T.A. No. 885/Mum/2020\n                              (Assessment Year 2011-12)\n\n     Boss Infosolutions Private              Vs. ITO,Ward-12(1)(3)\n     Limited                                      Room No.145A,\n     107/108, Natraj Market,                      Aaykar Bhawan\n     Mezannie floor                               M.K.Road\n     Opp. Kasturba Cinema                         Mumai-400 020\n     Malad West\n     Mumbai-400 064\n\n     PAN : AACCB3849H\n     (Appellant)                                  (Respondent)\n\n\n                 Assessee by           Vivek Jani\n                 Department by         Ms. Smita Verma\n                 Date of Hearing       13.10.2021\n                 Date of Pronouncement 20.12.2021\n\n                                        ORDERPer Shri Shamim Yahya (AM) :-This appeal by the assessee is directed against the order of learned\nCommissioner of Income Tax (Appeals)-20 dated 04.12.2019 and pertains to\nassessment year 2011-12.2.     Grounds of appeal read as under:-GROUND NO. I: REOPENING TO BE BAD IN LAW:1.    On the facts and in circumstances of the case and in law, the Ld. CIT(A) erred\n       in upholding the reassessment proceedings initiated by the Learned Assessing Office\n       (Income tax Officer Ward 12(l)(3))("Ld. AO") under section 147 of the Act.2. The Appellant prays that the reopening be held to be bad in law.GROUND NO. II: DISREGARDING PURCHASES:2IT A N o . 8 8 5 /M / 2 0 2 01.    On the facts and circumstances of the case and in law, the Ld, CIT(A) erred in\n       upholding the observation of the Ld. AO that the purchases amounting to Rs.\n       13,11,393 is non-genuine.2.   The Appellant prays that the purchases be held to be genuine and the same be\n       allowed while computing the taxable income of the Appellant.GROUND NO. III: ADDITION ON ACCOUNT OF PURCHASES FROM M/s.\n       GLOBAL 1MPEX (INDIA):1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in\n       upholding the action of the Ld. AO in disallowing purchases made from M/s Global\n       Impex (India) on the basis of third party statement. . .2. The Appellant prays that the Ld. AO be directed to allow the purchases from\n       M/s. Global Impex (India).3.   Brief facts of the case are that assessee is engaged in the business of wholesale\nand retail trade of computers and its peripheral/parts. Upon information received from\nSales tax department regarding bogus purchases, the AO reopened and issued notice\nto the assessee. The assessee responded as under;-In response to the same the assessee's representative vide letter dated 12-11-2018\n       submitted that the assessee has discharged its primary onus of providing the purchase\n       details in the form of purchase bills, ledger account, bank details and subsequent sale\n       of the products. The assessee further stated that the purchases made from the above\n       party was properly recorded in the books of assessee and the payments were made\n       through bank accounts. The said purchases were subsequently sold and the same was\n       recorded in the sales tax return. The assessee further contended that non-service of\n       notice u/s. 133(6) is not a basis for disallowance of purchase. The assessee, therefore,\n       contended that the purchases are genuine and no additions on this account is\n       warranted.4.   However, AO was not satisfied, he put great emphasis on the information from\nsales tax department and non response to notice u/s. 133(6). He proceeded to partly\nreject the book for the said purchases and disallowed the purchases by observing as\nunder:-Under this circumstance, after considering the submissions and perusing the material\n       available on record and in view of lack of material deficiencies, I hold that since\n       purchase shown by the assessee during the year remained unverifiable, there is a\n       leakage of revenue. Therefore, books of account of the assessee is hereby rejected to3IT A N o . 8 8 5 /M / 2 0 2 0\n\n\nthe extent of hawala purchase by invoking the provisions ofSection 145(3)of the I.T.\nAct, 1961,\n As mentioned hereinabove, the purchase rate as mentioned in the alleged purchase\nbill cannot be accepted. Any person indulging in the practice of purchasing goods\nfrom the grey market and obtaining bills of other parties to support the grey\npurchases of the alleged qualification as genuine purchases, would do so for getting\nsome benefit. But what would be the magnitude of the benefit in this type of case.\nThe above noted party become conduit between the assessee and the seller of the\ngoods. Under the circumstances, it was able to inflate the price of goods.\nAccordingly, the purchases made from the above party is treated as non-genuine and\nassessee could not explain these expenses satisfactory beyond1 any doubt and the\nsame is disallowedu/s. 69Cof the Income Tax Act on the following findings:-(i)     that the physical delivery of the goods were obtained from the party based in\ngrey market and to give it colour of being a genuine purchase, the bogus bill/\naccommodation bill was obtained from the supplier who declared himself as Hawala\nDealers under MVAT\n•Act, 2002. .(ii)     Though the purchase alleged as genuine and shown to have been made by\nmaking payment thereof by an account payee cheque, the cheques have been\ndeposited in bank account ostensibly in the name of the apparent seller. '(iii)    The assessee has produced certain details but could not prove beyond doubt\nthat the transactions were genuine. Even though the details of supplier and goods\npurchased are filed it cannot be relied upon as the Sales Tax Registration of the said\nsupplier stood cancelled with effect from 2011. The supplier has intentionally stayed\naway from the confirmation of account as they are aware that the said transactions\nwere not genuine. In the absence of details from the supplier no further enquiry could\nbe made regarding the transfer of money from their account.(iv).      Moreover, the party have given affidavit before the Sales Tax\nDepartment that they have not supplied the goods and only bills were issued. They\nhave further confirmed that they have received the cheques against such bogus\npurchase bills. Subsequent to the action by the Sales Tax Department these parties\nhave closed their bank account and left the premises in which bills were issued.These parties were only paper concerns and had no capacity to purchase these items\nand had no facility to store these stocks. They have issued bills for different type of\ngoods which they have not purchased and had no stocks and had no\ninfrastructure to store such items.(v) Reliance is placed in the Supreme Court decision in the case of N.K.Proteins\nwherein it was held that in case of bogus purchases 100% disallowance is required as\nthese parties have been declared bogus. Further, recently the Hon'ble Bombay High\nCourt has held that disallowance should be made in respect of bogus purchases. It is\nfurther seen that the assessee has shown a meagre net profit . of Rs. 1,98,981 on a\nsales turnover of Rs. 6,60,16,842/- which is quite abnormal in the field of wholesale\nand retails of computer and peripherals in the financial year 2010-11 when there was\ngreat demand for computer and peripherals. The assessee has indulged in the practice\nof bogus purchase to inflate the expenses and reduce the profits. Considering the facts4IT A N o . 8 8 5 /M / 2 0 2 0\n\n\n      of the case, I am of the considered opinion that expenses are covered undersection\n      69Cof the Income Tax Act and the expenses incurred in the form of non-genuine\n      purchases of Rs. 13,11,393/-from M/s. Globe Impex (India) is disallowed and added\n      to the income of the assessee. Penalty proceeding undersection 271 (l)(c)and\n      explanations thereof of the Act are initiated for concealment of income.5. Against the above order, assessee is appeal before the Ld.CIT(A), challenging the\nreopening as well as the merits of the case. Ld.CIT(A) rejected both. On reopening,\nhe has held as under:-"In the course of appellate proceedings he appellant could not substantiate its\n      contention. I find from para 3 of the assessment order that reasons for the reopening\n      recorded by the AO was provided to the appellant. The onus was the appellant to\n      furnish the reasons for the reopening recorded by the AO and substantiate its claim\n      raised in the ground of appeal. The appellant has failed to do so. The appellant has\n      also failed to produce a copy of the order dated 17.07.2018 passed by the AO\n      disposing of the objections raised by it the course of the assessment proceedings.6.   As regards, Ld.CIT(A)'s order on reopening. I have heard both the parties and\nperused the records. I find that the above order is laconic order without proper\napplication of mind. It is settled law that even administrative orders have to be\nconsistent with rules of natural justice. Hence, I remit the issue to the file of the\nLd.CIT(A) to     pass proper speaking order after granting the assessee proper\nopportunity of being heard.7. As regards merits, I note that Ld.CIT(A) has held that part rejection of books of\naccounts as been done by the AO                 is correct. I find that this limb of\nLd.CIT(A)/adjudication is also not sustainable. As the same books cannot be accepted\nand rejected at the same time. The common law maxim of approbate and reprobate\ndoes not mandate such a view point. Furthermore, the merits of the addition have also\nbeen upheld by the Ld.CIT(A). I note that merely on the basis of return of notice\nissuedu/s. 133(6)as unserved 100% disallowance is not at all sustainable. In this\nregard, the case law from Nikunj Eximp Enterprises( in Writ Petition No.2860, order\ndated 18.06.2014)of the Hon'ble Jurisdictional High Court            and in the case of5IT A N o . 8 8 5 /M / 2 0 2 0\n\n\nMohammad Hazi Adam & Co in ITA No.1004 of 2006, dated 11.02.2019 of Hon'ble\nHigh Court are germane. These relevant decisions of Hon'ble Bombay High Court\nhave not been considered by Ld.CIT(A). Hence, since I have already remitted the\nissue of reopening in the file of Ld.CIT(A), Ld.CIT(A) is directed to consider the\nissue on merits afresh keeping in mind, the observations hereinabove.8. In the result, this appeal filed by the assessee stands allowed for statistical\npurposes.Pronounced in the open court on 20 .12.2021\n\n\n                                                                Sd/-(SHAMIM YAHYA)\n                                                        ACCOUNTANT MEMBER\n\nMumbai; Dated :20 /12/2021\nThirumalesh, Sr.PS\n      Copy of the Order forwarded to :1.   The Appellant2.   The Respondent3.   The CIT(A)4.   CIT5.   DR, ITAT, Mumbai6.   Guard File.BY ORDER,\n               //True Copy//\n\n                                                                  (Assistant Registrar)\n                                                                   ITAT, Mumbai