VIJAYKUMAR MOHANLAL GOPALANI,ULHASNAGAR vs. ITO, WARD 3(4), KALYAN

Facts relating to the case are stated in brief. The assessee is a trader in stationary and general items. He filed its return of the income for the year under consideration declaring total income of Rs. 2,12,670/- and the same was processed under section 143(1) of the Act. Subsequently, the Assessing Officer received information that certain dealers are indulging in providing bogus bills in the form of accommodation entries and the assessee was found to be one of the parties who has purchased goods from a hawala dealer named Vinay Trading to the tune of Rs. 81,764/-. Hence, the Assessing Officer reopened the assessment under section 147 of the Act. Since the 2 Vijay Mohanlal Gopalani assessee did not furnish any explanation, the Assessing Officer disallowed entire amount of bogus purchases of Rs. 81,764/-. The Assessing Officer further noticed that the assessee has shown gross receipts by way of sales to the tune of Rs. 62,86,378/- and he has claimed purchase expenses and other expenses to the tune of Rs. 60,73,708/-. The Assessing Officer took the view that the assessee has not proved the expenditure claimed by him and accordingly held that 20% of the expenses should be disallowed. After deducting the amount of bogus purchases already disallowed, the Assessing Officer made net disallowance Rs. 11,98,389/- out of various expenses claimed by the assessee. The learned CIT(A) also confirmed the same and hence the assessee has filed this appeal before the Tribunal.

We heard the parties and perused the record. The first issue relates to the disallowance of alleged bogus purchases. We noticed that the total amount of purchases made by the assessee from various parties was Rs.61,23,994/- (including VAT), out of which purchases made from Vinay Trading is Rs. 81,764/-, which works out to 1.3% to the total value of the purchases. It is the case of Learned AR that the assessee has actually purchase goods from the above said concern also and sold the same. He further submitted that the assessee is a smalltime trader and the gross profits declared by him over the year are very much comparable. Accordingly, he submitted that there was no requirement for the assessee to book bogus expenses, as he is operating at small level. Accordingly he submitted that the Assessing Officer was not justified in disallowing the alleged bogus purchases.

We heard learned DR and perused the record. Considering the status of the assessee as well as the quantum of purchases, we agree with the submission of learned AR that there was no necessity for the assessee to book the bogus expenditure. The assessee has also given rate of gross profit and net profit declared by him from A.Y. 2007-08 to 2011-12. We noticed

The next issue relates to adhoc disallowance of 20% of the expenses claimed by the assessee. The actual expense claimed by the assessee in the profit and loss account is around Rs. 2.81 lakhs only. The Assessing Officer has considered the purchases amount of Rs. 58.42 lakhs also as a part of the expenses and disallowed 20% thereof. The assessee has furnished copy of the profit and loss account at page No. 8 of the paper book and we do not notice any unusual claim of the expenses. Hence, we are of the view that the disallowance of 20% made by the Assessing Officer is very much on the higher side. Accordingly for the reasons discussed in the previous paragraph, we are of the view that a portion of expenditure may be disallowed. Accordingly, we estimate the disallowance out of various expenses at a sum of Rs. 50,000/- and in our view the same would meet the ends of justice. Accordingly we set aside the order passed by the learned CIT(A) and direct

In the result, appeal filed by the assessee is partly allowed.