RAJESH GOKULCHAND AGRAWAL,MUMBAI vs. INCOME TAX OFFICER, WD-41(3)(3), MUMBAI

Brief facts of the case are that assessee is an individual, proprietor of G.N.

Aggrieved by the additions in the assessment, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee filed details statement of facts. The assessee in his statement of facts submitted that he is proprietor of G.N. Enterprises and engaged in the business of trading in fabrics. The assessee while filing return of income declared total income of Rs. 47,66,370/-. The assessing officer reopened the case of assessee on the basis of information and inside portal. The case of assessee was reopened on the basis of information received from Investigation Wing that Rajshree is a paper entity and indulged in bogus transaction. The assessee during assessment furnished his written submission dated 31.03.2023 along with detailed documentary evidences. In order to prove the genuineness of purchases, the assessee furnished purchase bills, corresponding sales bill, GST returns, GST registration certificate, confirmation of account, bank statement, quantity details. The assessee also furnished copy of PAN Card and GST registration certificate of supplier to establish the genuineness of sale. The assessee has shown gross profit @ 3.23% which is similar to the G.P. disclosed in earlier years as well as in subsequent years. The assessee requested the assessing officer to provide the incriminating material and the statement to allow opportunity for cross examination of such party. Copy of incriminating material and statement was not provided. The assessing officer without any justification and in absence of contrary material made addition under section 69C of entire purchases shown from Rajshree. In addition to, the assessee submitted that books results were not rejected. The assessee furnished correspondence sales bills and submitted that assessee cannot be penalised for any non-genuine transaction entered by such disputed supplier.

The ld. CIT(A) on considering the submission of assessee recorded that assessee produced various documents. The same are self-serving and afterthought. Notice issued to the seller parties under section 133(6) remained not complied. The ld. CIT(A) confirmed the action of assessing officer by referring decision of Supreme Court in N.K. Proteins (2017-TIOL-23- SC-IT) and Gujarat High Court Smit P. Sheth 356 ITR 461. Further, aggrieved the assessee has filed present appeal before Tribunal.

We have heard the submission of learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr.

Ground no. 3 and 4 relates to addition under section 69C being hundred percent of alleged bogus purchases and ground no. 5 is alternative ground to sustain the addition of such disputed purchases to the extent of 5.00% of such disputed expenses of purchases. The ld. AR of the assessee submits that during the assessment, the assessee furnished complete details of purchases which including the tax invoices, details of payment made through banking channel and all quantitative details of purchases and corresponding sales. The assessee has shown corresponding sales against the purchases.

In alternative submissions, the ld. AR of the assessee submits that it is settled position under the income tax law that entire transaction cannot be treated as income of the assessee; rather only reasonable percentage of profit could be added to avoid the possibility of revenue leakage on such alleged tainted purchases. The ld. AR of the assessee submits that disallowance may be restricted to 5.00% of the impugned purchases. To support his various submissions, the ld. AR relied upon the following decisions:

On the other hand, the ld. Sr. DR for the Revenue supported the order of lower authorities. The ld. Sr. DR for the revenue submits that assessee is a beneficiary of bogus purchases. The assessing officer was having information in incite portal that Rajshree was engaged in provided accommodation entry without actual delivery of goods. The assessee has shown purchases to inflate the expenses, thus, assessing officer as well as ld. CIT(A) disallowed the entire purchases shown from tainted party. The ld. Sr. DR for the revenue relied upon the decision of Supreme Court in N.K. Proteins relied by ld. CIT(A) in his order.

In the short rejoinder submission, the ld. AR of the assessee submits that overall purchases of assessee are of more than Rs. 9.50 crore and the disputed purchases are merely 5.00% of total purchases. The assessee has shown good profit ratio and prayed to restrict the disallowance @ 5.00% in a worst position so that the matter may be end.

We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by both the parties. We find that the assessing officer made addition of 100% of purchases shown from Rajshree. The action of the assessing officer is based the information available in his inside portal.

We find that Hon’ble Bombay High Court in CIT Vs Nikunj Eximp Enterprises (P) Ltd (supra) held that mere non-compliance, by seller to notice under section 133(6) would not disprove the transaction where sales are supported with sufficient evidence. We further find that neither the books profit is questioned by the assessing officer nor the corresponding sales of the assessee are disputed. We find that overall purchases of assessee during the relevant financial year is of more than Rs. 9.50 crore and the disputed purchases are merely 5.00% of total purchases No sale is possible in absence of purchases. We also find that the assessee has prima facia discharged his onus to substantiate the credit of purchases. Thus, in such circumstances, the disallowances of 100% of purchases from Rajshree are not justified.

In the result, the appeal of assessee is partly allowed.