JALPESH VINAY KUMAR SHAH,MUMBAI vs. ITO 23 (2)(3), MUMBAI

The registry has noted a delay of 72 days in assessee’s appeals. The condonation of the same has been sought by the assessee on the strength of condonation petition dated 06/01/2020 which is supported by the affidavit of the assessee. It has been submitted that delay has occurred due to adverse medical conditions being faced by the assessee’s son. After going through the condonation petition and the affidavit of the assessee, the bench formed an opinion that there was reasonable cause in late filing of these appeals and therefore, the delay 3 Shri Jalpesh Vinay Kumar Shah Assessment Years: 2009-10 to 2011-12 was to be condoned. Accordingly, we proceed with the adjudication of appeals on merits.

The Ld. AR pleaded to restrict the addition to the extent of 2.5% as done by Tribunal in the case of assessee’s brother titled as Dharmesh Vinay Kumar Shah, & ors. order dated 21/04/2017. The copy of the order has been placed on record. The Ld. DR, on the other hand, pleaded for restoration of assessment order. Our adjudication would be as given in succeeding paragraphs. 4.1 The material facts in AY 2009-10 are that the assessee’s case was reopened pursuant to receipt of certain information from Sales Tax Department, Maharashtra wherein it transpired that the assessee made suspicious purchases of Rs.314.44 Lacs from 11 entities as tabulated in para-6 of the assessment order. Accordingly, notice u/s 148 was issued on 23/03/2013 which was followed by statutory notices u/s 142(1) & 143(2) wherein the assessee was directed to substantiate these transactions. 4.2 In support of purchases, the assessee produced ledger extracts, copies of purchase bills, corresponding sales, transportation bills etc. The payments were stated to be made through banking channels. However, notices issued u/s 133(6) to all the suppliers did not elicit any satisfactory response. Finding that the assessee failed to discharge the onus of proving the purchases, the same were added to the income of the assessee.

The Ld. CIT(A), after considering assessee’s submissions, noted that sales were accepted by Ld. AO and without purchases, there could be no sales. Therefore, it could be concluded that the assessee purchased goods from grey market and procured bills from these 4 Shri Jalpesh Vinay Kumar Shah Assessment Years: 2009-10 to 2011-12 suppliers to suppress the profits. Relying upon the decision of Hon’ble Gujarat High Court in CIT V/s Simit P. Sheth (356 ITR 451), the estimation was made @12.5%. The said adjudication has given rise to cross-appeals before us.

Going by the factual matrix, we concur with the adjudication of Ld. CIT(A) that sales turnover was not under doubt and there could be no sales without actual purchase of material keeping in view the fact that the assessee was engaged in trading activities. Therefore, it was a fit case to make estimated additions. We find that under similar factual matrix, coordinate bench of this Tribunal in the cited decision has estimated the addition @2.5% in case of similarly placed assessee. Therefore, respectfully following the same, we direct Ld. AO to restrict the addition to 2.5% of suspicious purchases. In the result, the appeal filed by the assessee stands partly allowed whereas the appeal of the revenue is dismissed.

Facts in AY 2010-11 & 2011-12 are similar wherein Ld. AO has disallowed entire purchases. However, Ld. CIT(A) has estimated the additions @12.5% which is given rise to cross-appeals. Facts being pari- materia the same as in AY 2009-10, we direct Ld. AO to restrict the addition to the extent of 2.5% of suspicious purchases. In the result, the appeal filed by the assessee stands partly allowed whereas the appeal of the revenue stands dismissed.