SHRI. BALKRISHNA ABAJI RANE (HUF),MUMBAI vs. ITO 21(1)(2), MUMBAI

The Brief facts of the case that, the assessee is engaged in the business of manufacturing and maintenance of electric furnace. The assessee has filed the return of income for the A.Y 2009-10 on 30.09.2009 disclosing a total income of Rs.14,97,160/-. The return of income was processed u/s 143(1) of the Act. The Assessing Officer (A.O) has received the information from DGIT(Inv) and sales Tax Department Mumbai that the assessee was indulged in obtaining of bogus purchase bills without actual delivery of goods. The A.O found that the assessee is a beneficiary and obtained the bogus purchase bills from five parties aggregating to Rs.13,96,695/-.The A.O has reason to believe that there is a income escaped the assessment and after recording the reasons has issued the notice u/s 148 of the Act. The assessee has filed a letter dated 21.03.2014 to treat the return of income filed on 30.09.2009 as a compliance to notice u/s 148 of the Act. Subsequently, the notice u/s 143(2) and 142(1) of the Act along with questionnaire was issued.

In compliance, the Ld. AR of the assessee appeared from time to time and submitted the details. The Assessee vide letter dated 14.10.2014 has furnished copy of audited accounts along with audit report, purchase invoice, delivery challans, copy of the ledger accounts, details of goods and bank statement etc. The A.O to test check the genuineness of the transactions has issued notice u/s 133(6) of the Act on the five parties and the said notices were returned unserved with a remark of ‘not known’ by the postal authorities. The A.O has issued a show cause notice for submitting the additional details but the assessee could not substantiate with proper evidence in respect of the maintenance of stock register and production of the parties. Finally, the A.O. has dealt on the information and the available evidences and is of the opinion that the assessee has indulge in bogus purchases and estimated the income considering the profit element @22% on bogus purchases which worked out to Rs.3,07,273/-and assessed the total income of Rs. 18,04,430/- and passed the order u/s 143(3) r.w.s 147 of the Act.

Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) considered the grounds of appeal, submissions of the assessee and findings of the A.O but was not satisfied with the explanations and material submitted. The CIT(A) observed that the assessee has indulged in obtaining the bogus purchase bills and the profit embedded has to be added. The CIT(A) considered the stock statement filed and came to a unilateral conclusion that the A.O. has properly dealt on the facts and estimated income @ 22% which is reasonable and confirmed the addition and dismissed the assessee’s appeal. Aggrieved by the CIT(A) order, the assessee has filed an appeal before the Honble Tribunal.

We heard the rival submissions and perused the material available on record. The sole disputed issue is in respect of addition of bogus purchases made by the A.O. and confirmed by the Ld.CIT(A). We find on perusal of the Assessment Order, the Assessing Officer has made addition @22% of the purchases as there is no compliance to the notice u/s. 133(6) of the Act. Whereas the assessee has made bogus purchases from the dealers and in turn it provides savings to the assessee in nonpayment of state taxes. We considered the facts and circumstances and the decisions of the Honble High Court and the Honble Tribunal in the identical cases and the judicial precedence were estimating the profit element embedded @ 12.5% of Balkrishna Abaji Rane,HUF, Mumbai. - 7 - doubtful/ bogus purchases was accepted. We find that the assessing officer has not doubted the sales and we rely on the ratio of decision of Hon'ble Jurisdictional High Court in the case of CIT v. Nikunj Eximp (216 Taxman.com 171) ) and Honble Gujarat High court in CIT Vs. Simit P Sheth (2013) (356 ITR 451). Accordingly, we restrict the addition to the extent of 12.5% of the bogus purchases and modify the Ld.CIT(A) order sustaining the addition @ 12.5% of purchases and partly allow the grounds of appeal