ITO, WARD 3 (4), THANE vs. SANJAY BHOGILAL SHAH, DOMBIVALI

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals) -1, Thane [in short ‘the CIT(A)’] dated 19/08/2019 for the assessment year 2010-11.

The brief facts of the case as emanating from records are: The assessee is engaged in trading of ferrous and non-ferrous metals. The assessment for assessment year 2010-11 in the case of assessee was reopened on the basis of information received from DGIT(Investigation), Pune. As per information received, the assessee had obtained bogus purchase bills aggregating to Rs.3,18,276/- from Shradhha Trading Co.(Rs.1,63,302/-) and Sun Enterprises (Rs.1,55,974/-). Both the aforesaid parties were declared as hawala operators by the Sales Tax Department, Government of Maharasthra. During assessment proceedings the assessee failed to discharge his onus to prove genuineness of aforesaid dealers and purchases made from them. Thus, the Assessing Officer made addition of the entire bogus purchases. Against the assessment order dated 13/02/2015 passed under section 143(3) r.w.s. 147 of Income Tax Act, 1961 (in short 'the Act'), the assessee field appeal before the CIT(A). The CIT(A) restricted the disallowance of bogus purchases to Rs.39,785/- by estimating suppressed profit margin on bogus purchases at 12.5%. Now, the Revenue is in appeal against the relief granted by the CIT(A).

Shri Sanjay J. Sethi representing the Department vehemently defended the assessment order and prayed for reversing the findings of CIT(A). In support of his submissions the ld. Departmental Representative placed reliance on the decision of N.K. Proteins Ltd. vs. DCIT reported as 250 Taxman 22(SC).

Submissions made by ld. Departmental Representative heard, orders of authorities below examined. Undisputedly, the assessee failed to discharge his onus in proving genuineness of the dealers and the purchases made from the said dealers. At the same time it is observed that the Assessing Officer has accepted the sales turnover declared by the assessee. Without purchases there cannot be sales. It is only the profit margin embedded in such like transactions that can be brought to tax. [ RE: PCIT vs. Paramshakhti Distributors Pvt. Ltd. in Income Tax Appeal No.413 of 2017 decided on 15/07/2019 by Hon'ble Bombay High Court]. In the facts of the case, the Assessing Officer has erred in making disallowance of entire bogus purchases. The CIT(A) has estimated suppressed profit margin on alleged bogus purchases @12.5% as against G.P of 5.47% declared by the assessee. I find no reason to interfere with the finding of CIT(A), hence, the impugned order is up held and appeal of the Revenue is dismissed being devoid of any merit.

In the result, appeal by the Revenue is dismissed.