JAGGI AND JAGGI MACHINE TOOLS INDIA,NAVI MUMBAI vs. INCOME TAX OFFICER 24(2)(2), MUMBAI

The brief facts of the case are that the assessee is a partnership firm dealing in heavy machinery on wholesale basis. The assessee has filed the return of income on 30.09.2009 along with the tax audit report for the A.Y 2009-10 disclosing a total income of Rs.7,28,031/-. Subsequently, the A.O. has received information from the DGIT(INV), Mumbai that the assessee has obtained the bogus purchase bills from two parties and the assessee is the beneficiary of the transaction. Therefore the A.O after recording the reasons for reopening and observe that there is income escaping the assessment and has issued notice u/s 148 of the Act. Subsequently the notice u/s 143(2) and 142(1) of the Act are issued. The A.O. found that the assessee has made purchases from two parties as per the information of Sales Tax Department aggregating to Rs. 37,96,875/-. Jaggi and Jaggi Machine Tools India, Mumbai - 3 -

The A.O. to test check the genuineness of the transaction has issued notice u/s 133(6) on the parties and no reply has been received. Therefore the A.O. called for the further information by way of show cause notice to substantiate with evidences and the assessee has submitted the details on 18.02.2015 and prima-facie the assessee could not produce the parties and the A.O. was not satisfied with the information and estimated the profit element@ 12.5% of alleged bogus purchases which worked out to Rs. 4,74,609/- and assessed the total income of Rs. 12,47,410/- and passed the order u/s 143(3) r.w.s147 of the Act dated 28.03.2015.

Aggrieved by the order, the assessee has filed an appeal before the CIT(A).Whereas the CIT(A) has confirmed the action of the A.O. and dismissed the appeal. Aggrieved by the order of the CIT(A), the assessee has filed an appeal before the Hon’ble Tribunal.

At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in sustaining the addition by the A.O estimated @12.5%. The contention of the Ld. AR that the transaction is genuine and further the Gross Profit (GP) on alleged bogus purchases has been considered in books of accounts, which is more than 15%.Further he substantied with the financial statements to prove that Jaggi and Jaggi Machine Tools India, Mumbai - 4 - the assessee GP rate is more than the profit percentage estimated by the AO and prayed for allowing the appeal. Contra, the Ld. DR supported the order of the A.O.

We heard the rival submissions and perused the material on record. The sole matrix of the disputed issue as envisaged by the Ld. AR that the GP percentage of the assessee is around @15.25% for this assessment year and therefore estimating again on the business purchases alleged as bogus @ 12.5% will be substantially higher and GP rate has been provided by the assessee as per the business standards and the rate of GP is worked out for earlier years and subsequent years. We found that the assessee having accepted the fact that it is involved in the purchases transactions cannot be over looked. Further it is pointed out by the Ld. AR that the GP rate @ 15.25% is based on the books of accounts audited and tax audit report. We are of the opinion that the action of the assessee in obtaining the bogus purchase bills cannot be ignored. Accordingly to meet the ends of justice, we restrict the addition irrespective of the GP rate of the assessee to the extent @6% as against the @ 12.5% and this rider is applicable only for this assessment year and cannot be applied for others. Accordingly the CIT(A) order is modified to the extent of 12.5% and partly allow the grounds of appeal. Jaggi and Jaggi Machine Tools India, Mumbai - 5 -

Since we have decided on the merits of the case, the grounds of appeal with respect to validity of re-assessment proceedings raised by the assessee becomes academic and are left open.

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