ITO 32 (2)(4), MUMBAI vs. OM ENTERPRISES, MUMBAI

Ms. Smita Verma representing the Department submitted that during the period relevant to Assessment Year (AY) under appeal, the assessee has obtained bogus purchase bills aggregating to Rs. 19,08,358/- from the dealers, declared as hawala operators by the Sales Tax Department, Government of Maharashtra. During assessment proceeding, the assessee failed to respond to the notices and hence, the Assessing Officer (AO) was constrained to pass the assessment order under section 144 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’]. The notices sent to the dealers under section 133(6) of the Act were returned back unserved by the postal authorities with remarks ‘Left’/ ‘Not known’, hence, veracity of dealers and purchases made from them remained unverified. The AO estimated Gross Profit (GP) at the rate of 30% on unproved purchases. The assessee carried the issue in appeal before the CIT(A), the CIT(A) restricted the addition 12.5% of disputed purchases. Now, the Revenue is in appeal before the Tribunal assailing the findings of CIT(A) in reducing the estimated profit margin on unproved purchases from 30% to 12.5%. The ld. Departmental Representative (DR) vehemently supporting the assessment order prayed for upholding the addition made by the AO.

Submissions made by ld. DR heard, orders of authorities below examined. A perusal of assessment order shows that the assessee has failed to appear before the AO. The assessee is engaged in trading of Auto parts etc. Undisputedly, the assessee failed to discharge its onus in proving genuineness of the dealers and purchases made from them. The sales turnover declared by the assessee has been accepted by the AO, therefore, the AO has estimated profit margin on bogus purchases at the rate of 30%. In first appellate proceedings, the CIT(A) upheld the findings of AO in so far as assessee’s

आअसं. 6224/मुं/2019 (िन.व.2010-11) (A.Y.2010-11) involvement in obtaining bogus purchase bills are concerned. However, the CIT(A) restricted the addition on bogus purchases by estimating profit margin at the rate of 12.5%. In my considered opinion, estimation of profit margin on unproved purchases by AO is on higher side. I see no infirmity in the impugned order, hence, the same is upheld and appeal of the Revenue is dismissed, sans merit.