PRAKASH MARIO PINTO ,MUMBAI vs. COMMISSIONER OF INCOME TAX (APPEAL), MUMBAI

The solitary issue involved in this appeal is the addition made on bogus purchases @ 15%, amounting to Rs.5,38,112/-.

The brief facts are that the assessee is an individual engaged in manufacturing of cased Iron oxide slabs under the name of “Twincorp India”. The assessee filed his return of income declaring total income at Rs.3,01,327/- dated 01.09.2009. Pursuant to the (A.Y. 2009-10) Prakash Mario Pinto vs. CIT(A) information received from the Investigation Wing of the department that the assessee is a beneficiary of availing bogus bills for purchases made through hawala operators as per Maharashtra Sales Tax Department, the assessee’s case was reopened and assessment order dated 30.03.2015 was passed u/s.143(3) r.w.s. 147 of the Act, by making addition on the impugned bogus purchases, amounting to Rs.35,87,416/- made from seven parties declared as hawala dealers out of the total purchase of Rs.63,88,550/-. The Assessing Officer (A.O. for short) made the addition on the basis that the assessee has failed to produce the parties and that notices could not be served on the said parties who are nonexistent at the addresses specified by the assessee. The A.O. has concluded that the assessee has failed to prove the genuineness of the impugned purchases.

The assessee preferred an appeal before the ld. CIT(A) who restricted the disallowance to 15% of the alleged bogus purchase and restricted the addition amounting to Rs.5,38,112/- out of the total disallowance of Rs.35,87,740/-.

The assessee is in further appeal before us against the order of the ld.CIT(A).

The assessee appeared in person before us and contended that the assessee has declared 7.94% as gross profit earned during the impugned year and prayed that the addition is to be restricted only to the average percentage of gross profit of A.Y. 2008-09, which is 7.3% and A.Y. 2009-10 @ 7.94% and the average would be 7.62%.

Having heard the rival submissions and perused the materials on record. It is observed that the assessee had made purchases with several parties during the impugned year, out of which the below mentioned parties have been declared as hawala dealers as

Sr. No. Name of the parties Amount 1 Apex Steel 333610 2 Siddhivinayak Steel 345882 3 Surat Tube Corporation 127803 4 Shriti Enterprises 223764 5 Asina Steel 358586 6 Maruti Steel Traders 797387 7 Shiv Industries 1400384

It is also observed that during the assessment proceeding, the A.O. has issued notice u/s. 133(6) to the above parties, which were found to have been returned as ‘unserved’ and further to this, the A.O. made independent enquiries as to the whereabouts of these parties, but was unable to trace out the identity of the said parties. The assessee made a submission that all these transactions were made through account payee cheques, but was unable to furnish evidences such as delivery challans, transportation details, etc. called for by the A.O. The assessee has failed to substantiate his claim to the satisfaction of the A.O. The A.O. made the impugned addition on the ground that the assessee has failed to discharge the onus casted upon him to prove the genuineness of the purchases and added the entire amount of the alleged purchases made through hawala dealers. The ld. CIT(A), on the other hand, rejected the books of accounts of the assessee by placing

During the appellate proceeding, the assessee contended that the said purchases made from these parties are genuine and that the assessee was unaware of the fact that these parties were hawala dealers. The assessee further contended that the assessee had made transaction through account payee cheques with these parties and all the said transactions were only through proper banking channels. The assessee further contended that in order to buy peace, the assessee had agreed to pay taxes on the alleged bogus purchase for which the assessee has already paid 4% VAT along with the interest due.

From the above submissions, we are of the considered view that the sales of the assessee has not been disputed by the lower authorities and considering the various decisions of the Tribunal which held that there cannot be any sales without corresponding purchases. As the assessee has declared gross profit for A.Y’s. 2008-09 and 2009-10 to (A.Y. 2009-10) Prakash Mario Pinto vs. CIT(A) be at an average rate of 7.62% which has been accepted by the assessee as the gross profit ratio on the profit embedded in the alleged bogus purchase, we are inclined to restrict the said disallowance to 7.62%, which is higher than the percentage specified by the various decisions of the Tribunal for similar nature of business carried out by the assessee. We direct the A.O. to restrict the disallowance to 7.62% of the total amount of alleged bogus purchase from hawala dealers.

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