JCIT(OSD) I/C DCIT-1(3)(1), MUMBAI, MUMBAI vs. DUFLON INDUSTRIES PRIVATE LIMITED, MUMBAI

In the grounds of appeal Revenue has challenged the order of the ld. CIT(A) relating to bogus purchase of Rs.16,17,386/- which was added by the ld. AO and thereby, applying GP rate of 12.5%.

1. Duflon Industries Pvt.Ltd., 3. From the perusal of the assessment order it is seen that assessee has filed return of income on 28/09/2011 declaring total income of Rs.1,17,18,877/-. Thereafter, assessment was completed u/s. 143(3) vide order dated 24/03/2015 determining total income of Rs.7,76,11,200/-. Thereafter, assessee’s case was reopened u/s.147 by issuance of notice u/s.148 dated 29/03/2016 on the ground that assessee has taken entry of bogus purchases of Rs.30,00,000/- and this information was received from the website of Maharashtra Sales Tax department who had declared certain parties as ‘hawala traders’. The ld. AO noted that assessee has taken purchases from third parties of Rs.16,17,386/- from the following parties:-

In response to the show-cause notice assessee had submitted the details of purchases and the payment made through account payee cheques etc., However, the ld. AO rejected the same on the basis of information on the website of the Sales Tax department of Maharashtra that these parties were found to be hawala dealers and treated the entire bogus purchases of Rs.16,17,386/- as income of the assessee.

After hearing both these parties and on perusal of the facts on record it is seen that it is not in dispute that assessee has given details of purchases and also the source of purchases were from the books and made through account payee cheques. On similar facts in the original quantum proceedings u/s. 143(3) ld. CIT (A) has applied GP rate of 12.5%. Before this Tribunal in the appeal for A.Y.2011-12, similar matter had come up wherein ld. CIT (A) has restricted the disallowance by applying GP rate of 12.5% on alleged bogus purchases, however, ld. AO has added the entire bogus purchases in the proceedings u/s.154 while computing book profit. The Tribunal had deleted the said addition on book profit stating that it is beyond the scope of u/s.115JB. In any case, application of GP rate on bogus purchases has now been upheld by the Hon’ble Bombay High Court in the case of Mohammad Haji Adam & Co., reported in 103 taxmann.com 459. Accordingly, appeal filed by the Revenue is dismissed.