DCIT 15 (2)(2), MUMBAI vs. PARTYTIME ICE PVT. LTD., MUMBAI

The present appeal has been preferred by the Revenue against the order dated 31.05.2019 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.

The only issue raised by the Revenue is against the order of Ld. CIT(A) restricting the addition to 12.5% of the bogus purchases as against 100% made by the AO.

The facts in brief are that the assessee filed the return of income on 25.09.2009 declaring total income at Nil which was processed under section 143(1) of the Act. The case of the assessee was thereafter reopened by the AO after receipt of 2 M/s. Partytime Ice Pvt. Ltd. information from DGIT (Inv.), Mumbai that assessee is beneficiary of hawala purchase entries to the extent of Rs.42,10,173/- and accordingly the notice under section 148 of the Act was issued on 28.03.2014. The AO called for various details and information from the assessee from time to time during the course of assessment proceedings which were duly filed before the AO. The AO finally rejected the contentions of the assessee and treated the purchases as non genuine thereby making an addition of 100% of the purchases of Rs.42,10,173/- to the income of the assessee by framing assessment under section 143(3) read with section 147 of the Act dated 27.03.2015.

In the appellate proceedings, the Ld. CIT(A) partly allowed the appeal of the assessee by directing the AO to apply rate of 12.5% of the bogus purchases by following the decision of CIT vs. Simit P. Sheth (2013) 356 ITR 451 (Guj) by holding that only profit embedded in the bogus purchases can be brought to tax and not the entire purchases.

After hearing the Ld. D.R. and perusing the material on record, we observe that Ld. CIT(A) has passed the appellate order after following the decision of Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Sheth (supra) wherein it has been held that in case of bogus purchases only profit element embedded in the bogus purchases is to be assessed. We note that the co-ordinate benches of the Tribunal have been taking a consistent view that in case of bogus purchases only a GP rate ranging between 2% to 12.5% depending upon the facts of the case. We note that in the present case the Ld. CIT(A) has 3 M/s. Partytime Ice Pvt. Ltd. directed to assess the income @ 12.5% which is quite justified and reasonable and therefore we do not find any reason why the Revenue is aggrieved by this order. Accordingly, we uphold the order of the ld CIT(A) by dismissing the appeal of the revenue.

In the result, the appeal of the Revenue is dismissed.