ITO 33 (2)(2), MUMBAI vs. KIRIT RASHIKLAL DOSHI, MUMBAI

Shri Sanjay J. Sethi representing the Department submitted that the assessment for assessment year 2011-12 in the case of assessee was reopened on the basis of information received from DGIT (Inv), Mumbai. As per the information received, the assessee had indulged in obtaining bogus purchase bills from nine dealers declared as hawala operators by the Sales Tax Department, Government of Maharashtra. During assessment proceedings, the Assessing Officer concluded that the assessee had obtained accommodation entries to the tune of Rs.28,85,753/- from six hawala operators. The assessee could neither produce suspicious dealers nor any confirmations from the said dealers. No documentary evidence in the form of delivery challan, lorry receipt, octroi receipt, etc. were furnished by the assessee to show trail of goods. Since, the assessee failed to discharge his onus in proving genuineness of purchases and the dealers, the Assessing Officer disallowed entire bogus purchases. In the First Appellate proceedings, the CIT(A) granted relief to the assessee by estimating profit margin on bogus purchases to 5%. Thus, the CIT(A) restricted the addition to Rs.1,44,287/- only. Now, the Revenue is in appeal against the relief granted by the CIT(A). The ld.Departmental Representative prayed for reversing the findings of CIT(A) and confirming the addition made in assessment order. To support his submissions the ld.Departmental Representative placed reliance on the decision of Hon'ble Supreme Court of India in the case of N.K. Proteins Vs. DCIT in SLP No.(C) 769 of 2017 decided on 16/01/2017.

Submissions by ld.Departmental Representative heard, orders of authorities below examined. The assessee / respondent is engaged in trading of electrical goods. Undisputedly, the assessee failed to discharge his onus in proving authenticity of suspicious dealers and the purchases made from them. The sales turnover declared by the assessee was accepted by the Assessing Officer, still the Assessing Officer disallowed 100% alleged bogus purchases. Once the sales turnover is accepted entire bogus purchases cannot be disallowed. It is only the profit element embedded in such transactions that can be brought to tax. The CIT(A) has estimated suppressed profit margin on unproved purchases at 5%. We find no reason to interfere with the findings of CIT(A), hence, impugned order is upheld.

In the result, appeal by the Revenue is dismissed sans merit.