RAJESH M KHANDAR (HUF),MUMBAI vs. ITO-26(2)(5), MUMBAI, MUMBAI

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals) -38, Mumbai [in short ‘the CIT(A)’] dated 28/02/2019 for the assessment year 2009-10.

Ms. Neha Paranjpe appearing on behalf of the assessee submitted thatthe assessee is engaged in trading of photocopiers and its parts, toner, etc. The assessment for assessment year 2009-10 in the case of assessee was reopened on the ground that the assessee has obtained bogus purchase bills aggregating to Rs.2,54,22,355/- from various dealers, declared as hawala operators. To prove genuineness of purchases the assessee submitted copies of purchase bills, bank statements indicating payments made to the vendors through banking channel, copies of the ledger accounts and copies of corresponding sales bills. The ld. Authorized Representative for the assessee further pointed that one of the vendor i.e. M/s. Navpad Exports Pvt. Ltd. from whom it has been alleged that the assessee had made purchases to the tune of Rs.2,25,43,928/-, the Assessing Officer wrongly recorded the sales transaction amount. In fact during the period relevant to the assessment year under appeal, the assessee had made purchases only to the tune of Rs.40,19,028/- from the said dealer. This fact was brought to the notice of Assessing Officer, however, the Assessing Officer on the basis of TIN has recorded that the transactions with the aforesaid vendor works out to Rs.2,25,43,928/-. The Assessing Officer made addition of Rs.31,77,794/- in respect of bogus purchases by estimating suppressed profit margin @ 12.5%. Aggrieved by the assessment order dated 20/03/2015, the assessee filed appeal before CIT(A). The CIT(A) without appreciating the facts and submissions of the assessee, confirmed addition as made by the Assessing Officer. The ld. Authorized Representative submitted that the assessee has furnished necessary documents to discharge its onus in proving genuineness of purchases, therefore, the entire addition on account of bogus purchases should be deleted. Without prejudice to the primary contention to delete the entire addition the ld. Authorized Representative for the assessee submitted that G.P declared by the assessee during relevant period is 3.48%, estimation by Assessing Officer / CIT(A) at 12.5% is very much on the higher side, therefore, the same be reduced suitably.

Per contra, Shri Sanjay J. Sethi representing the Department vehemently defended the impugned order and prayed for dismissing the appeal by the assessee. The ld. Departmental Representative submitted that the assessee has failed to discharge its onus in proving authenticity of the dealers and the purchases made from said dealers. The Assessing Officer in a very fair and reasonable manner has estimated suppressed profit margin on bogus purchases at 12.5%, therefore, the same should be retained. In respect of transactions with M/s. Navpad Exports Pvt. Ltd. the ld. Departmental Representative submitted that the Assessing Officer has examined documents on record and thereafter, has came to the conclusion that the amount of bogus purchases made by the assessee during the relevant period from the said dealer has been correctly recorded.

Both sides heard, orders of authorities below examined. In the course of assessment proceedings the assessee has furnished various documents to discharge its onus in proving genuineness of dealers and purchases made from them. However, the assessee has failed to furnish documents to show trail of goods viz. Octroi receipts, stock inward register, transport receipts, etc. The purported confirmations by the assessee which are part of Paper Book does not bear the signatures/seal of the dealers. Therefore, the assessee could not conclusively prove genuineness of purchases. At the same time it is observed that the sales turnover declared by the assessee has been accepted by the assessee. It is the suppressed profit margin embedded in such like transactions that can only to brought to tax. Estimation of suppressed profit margin @ 12.50 by the lower authorities in my considered view is on higher side. The assessee has declared G.P of 3.48% on regular transactions. Estimation of suppressed profit margin on unproved purchases at 5% would meet the ends of justice. I hold and direct accordingly.

The ld. Authorized Representative for the assessee has pointed that purchases from M/s. Navpad Exports Pvt. Ltd. has been wrongly recorded at Rs.2,25,43,928/- instead of Rs.40,19,028/-. This is a factual issue that requires examination of documents. This issue is restored to the file of Assessing Officer for the limited purpose to examine the documents furnished by the assessee in support of its claim. The Assessing Officer shall grant reasonable opportunity to the assessee to furnish and explain the relevant documents in support of his contentions.

In the result, appeal by the assessee is partly allowed. Order pronounced in the open Court on Monday the 4th day of October, 2021