SONAL PAREKH, LEGAL HEIR OF LATE SHRI ANUPKUMAR PAREKH,,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-1(3)(1),, AHMEDABAD

In the first ground of appeal

, the assessee has challenged reopening of the assessment by issuance of notice under section 148 of the Income Tax to 93/Ahd/2017

The ld.counsel for the assessee at the very outset contended that if the details submitted by the VAT Department of Mumbai are looked into, then it would reveal that transaction of Rs.43,04,579/- has been stated to be taken place in this assessment year, for which the assessee has obtained tax bills from hawala dealers. He took us through page no.3 of the paper book, and pointed out that in the information given by VAT department, they are pertaining to F.Y.2008-09, meaning thereby, these are for A.Y.2009-10, and not for the Asstt.Year 2008-09, therefore, according to him, the assessment cannot be reopened. Similarly, with regard to the Asstt.Year 2009-10, he contended that since there is mismatch between information given by the VAT vis-à-vis formation of believe in the Asstt.Year 2009-10, the total transaction ought to be Rs.43,04,579/- whereas the AO has harboured a belief that income has escaped to the extent of Rs.59,09,015/-. Thus, according to him, there is no nexus between the information available with the AO vis-avis formation of belief showing escapement of income for taxation.

The ld.DR, on the other hand, produced original assessment record, and contended that there are lots of information compiled from dealer firm exhibiting the fact that benefit of bills from Hawala traders from Mumbai have been taken by the assessee. He drew our attention towards the letter of Chief Commissioner written to the Commissioner for taking cognizance of this fact for monitoring time barred assessment in connection with these to 93/Ahd/2017 4 transactions. Along with this letter, details in tabular form have been compiled; they were possessed with the department. When we confronted these details to the ld.cousnel for the assessee, then, he submitted that as such the assessee did not press the ground for reopening of the assessment for all these three years, hence, the additional ground raised by the assessee is not admitted, as not pressed.

On merit first we take facts for the assessment year 2008-09. The assessee has filed his return of income on 30.9.2008 electronically declaring total income at Rs.2,18,880/-. The ld.AO has confronted the assessee as to show complete details of purchases. In response to the query of the AO, it was contended by the assessee that complete details of bills, which are being alleged as taken through hawala dealer be supplied to him. Thereafter, according to the AO, the assessee did not submit such details, and ultimately, the assessment was finalized. Before the ld.CIT(A), the assessee took a specific plea that details collected from the Sales-tax department are pertaining the assessment year 2009-10 and not 2008-09. This fact has specifically noticed by the ld.CIT(A) on page no.4, which reads as under:

As far as Asstt.Year 2009-10 is concerned, assessee again reiterated his submissions. These are being noticed by the ld.CIT(A) and they read as under: “However, in the grounds of appeal, it is mentioned by the appellant that the Sales Tax Department has conveyed to the Income Tax Department as the figures and hawala entries made by the .appellant on Financial Year basis whereas the Learned HO has taken/issued notice u/s. 148 on the basis of Assessment Year. The havala entries of Rs.59,09,015/- is for Financial Year 2009-10 whereas the AO has framed the assessment for A.Y. 2009-10. It should have been for A.Y. 2010-11. However, the contention of the appellant cannot be accepted to 93/Ahd/2017 6 as the appellant has not fled any evidence whatsoever in support of its contention. In fact, the appellant has never responded to the notices issued by the Department and did not bother to attend or file submissions. There is a deliberate attempt on the part of the appellant not to a-end the appeal proceeding which goes on to prove that there is no evidences whatsoever available with the appellant on the grounds of appeal filed with the undersigned. Merely stating something without adducing the proper evidences would not help the case of the appellant. Despite being given repeated opportunities, the appellant has failed to comply with any of the notices. Moreover, the appellant has not denied the havala entries made by the appellant. In fact, the appellant is absolutely silent about the nature of these entries and did not deny the same either in the statement of facts or grounds of appeal. This also proves that the appellant has indulged in havala entries and-has manipulated the accounts. Therefore, it is held that the appellant has no evidence whatsoever to prove its claim and therefore, the order passed by the AO is sustained and the appeal is dismissed.”

The ld.counsel for the assessee submitted that the assessee has made his sales to Vishal Mart, and all these sales are identifiable. These have been quantified. The supplier of the goods might not have supported their sales on account of certain sales-tax issues; but only element of profit involved in the alleged procurement of goods should be assessed in the hands of the assessee. He took us through pageno.4 of the paper book, wherein total purchases, sales and gross profit declared by him are being noticed. It reads as under: SUMMARY OF GROSS PROFIT F.Y. Purchase Sales Gross % Disallowance % Profit 2007 - 2008 8007434 9284294 897580 9.60 4304579 56.00 2008 - 2009 13015038 14037526 1022488 7.28 5909015 49.38 2009 - 2010 17178402 18498353 1319951 7.14 2615013 21.27 2010 - 2011 16200213 16978369 778156 4.58 0 2011 - 2012 21230275 22419028 1188753 5.30 2012 - 2013 33752972 35641997 1889025 5.30

He submitted that if these disallowances are confirmed, then profit will arise to 49.38% in the A.Y.2009-10, and 21.27% in the Asstt.Year 2010-11, which is practically not achievable. In other years, the AO has not made any addition. The profit reduced to 5.3%. The ld.DR, on other hand submitted that the assessee has inflated his purchases, and therefore, total purchases should be disallowed.

On due consideration of the above facts and circumstances, we are of the view that in terms of quantity, the purchases and sales have not been to 93/Ahd/2017 8 disputed. Only thing disputed by the Revenue is part purchases from the alleged total sales were treated as bogus. It can be examined with a simple example. That the assessee has purchased material from party “A” ; obtain bills from party “B”. Since he has not able to prove the purchases from “B”, therefore, the purchases have been treated as bogus. In fact, the material was received by the assessee. If that thing has not been happened, then sales would not have been achieved. Therefore, in these circumstances, only extra element of profit involved in this modus operandi of purchases of goods from party “A” and obtaining bills from “B” is to be worked for treating the income of the assessee. The assessee has already shown gross profit at 7.25% and 7.14%. If extra profit at the rate of 6% is being estimated qua the alleged purchases of Rs.59,09,015/- and Rs.26,15,013/- in the Asstt.Year 2009-10 and 2010-11, then ends of justice would meet. This 6% we have worked out on the basis of our past experience in dealing with such cases, wherein Hon’ble Gujarat High Court has also upheld estimation of profit ranging between 5% to 20% depending on the nature of business and considering undue profit earned by an assessee. In view of the above discussion, all the appeals of the assessee are partly allowed.

In the result, appeals of the assessee are partly allowed. Order pronounced in the Court on 9th December, 2019 at Ahmedabad.