ITO - 19(2)(3), MUMBAI vs. MITESH B. JANIKAR, MUMBAI

ORDER PER S. RIFAUR RAHMAN, A.M. The captioned appeals filed by the Revenue are against the order of the Commissioner of Income Tax (Appeals)-54, Mumbai [in short ‘CIT(A)’] for the assessment years 2010-11 & 2011-12 dated 09.03.2018 and arises out of assessment completed u/s 144 r.w.s. 147 of the Income Tax Act, 1961 (in short the Act). As the issue involved in the captioned appeals are inextricably interlinked or in fact interwoven and having common issue, the same are Shri Mitesh B. Janikar 2 & 3776/M/2018 therefore being taken up and disposed off by way of a consolidated order. Facts being identical we begin with the AY 2010-11. Assessment Year: 2010-11 2. At the outset, it is noticed that none appeared on behalf of assessee in spite of calls and even no application for adjournment was moved. On the other hand, Ld. DR is present in the court and is ready with arguments. Therefore, we have decided to proceed with the hearing of the case ex-parte with the assistance of the Ld. DR and the material placed on record.

Shri Mitesh B. Janikar 3 & 3776/M/2018 5. Aggrieved, the assessee preferred an appeal before Ld. CIT(A) and Ld. CIT(A) after considering the detailed submissions of the assessee and agreed with the Assessing Officer that these transactions are hawala transactions. However, restricted the estimated profit @ 12.5% on such bogus purchases. The findings of the Ld. CIT(A) are herewith submitted below :

6.4 The submissions of the ld. Counsel have been carefully considered. The LdA0 had made an addition of the entire bogus purchases which is not reasonable. Sales of the assessee have been accepted. There cannot be a sale without purchases. Therefore, in this case what can be added is only the min suppressed profit on the purchases supposedly made from the grey market and not the entire purchases. The total purchases of the appellant for the year are to the tune of Rs.1,06,05,044/-. Out of this, if an addition of Rs.84,41,345/- is made towards the bogus purchase it would result in an abnormal and unrealistic profit. The Ld.AO is directed to restrict the estimated profit at 12.5% of the alleged bogus purchase. The Lid.AO is further directed to reduce the gross profit (GP), already disclosed by the assessee from the estimated profit of 12.5% of the alleged bogus purchase. This ground of appeal is Partly Allowed.

1. Whether in the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in not confirming the addition in view of the decision of the Hon'ble Supreme Court dated 10.01.2017 in the case of N. K. Proteins Ltd. wherein the Hon’ble Supreme Court confirmed the entire addition on account of bogus purchase?" 2. "Whether in the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in deleting the addition of unexplained expenditure of Rs.84,41,345/- made on account of bogus purchase by the Assessing Officer and limiting it to 12.5%." 3. 3."Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in confirming the addition @12.5% profit rate on total purchases of Shri Mitesh B. Janikar 4 & 3776/M/2018 Rs.84,41,345/- made by the assessee from two parties when during the investigation made by sales tax department of Maharashtra Government, it was conclusively proved beyond doubt that these parties are only into providing accommodation entries and do not do any real business.?" 4. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in not appreciating the fact that during the investigation made but sales tax department of Maharashtra Government, directors/ Prop./ Partners of such parties have accepted on oath that they are providing only accommodation entries and not doing any real business, the treatment of such purchases as being genuine does not hold ground?" 5. The appellant prays that the order of the Ld. CIT(A) on the above grounds be set-aside and that of the AO be restored. 7. Considered the rival submissions and material on record. We noticed that the assessment was reopened based on by information received from DGIT (Inv.) in turn from Sales Tax Department, Government of Maharashtra. The Assessing Officer issued notices u/s 133(6) to the dealers and the same was returned un-served and there is no information from the assessee in this regard and accordingly he treated the accommodation entries as bogus purchases Accordingly, the AO made disallowance of 100% of the purchase amount whereas, the Ld. CIT(A) considered the submissions of the assessee and observed that no doubt the bogus purchases were recorded by the assessee at the same time the Assessing Officer has accepted the sales declared by the assessee. Therefore, the addition of the entire bogus purchases made by the AO is not reasonable. We are in agreement with the Ld. CIT(A) that what can be added is only the suppressed profit on the purchases made from grey market and not the entire purchases. Therefore, we are in agreement with the estimated profit @ 12.5% of the alleged bogus purchases sustained by the Ld. CIT(A) on bogus purchases. Therefore, we do not see any reason to interfere with the Shri Mitesh B. Janikar 5 ITA Nos. 3775 & 3776/M/2018 findings of the Ld. CIT(A). Accordingly, the grounds raised by the Revenue are dismissed.