ITO 31 (2)(1), MUMBAI vs. SHRI. INAMULLAH H CHOUDHARY, MUMBAI

The present appeal has been preferred by the Revenue against the order dated 03.05.2019 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.

The only issue raised in the various grounds of appeal by the Revenue is against the order of Ld. CIT(A) restricting the addition to 12.5% as against the addition made by the AO @25% on the bogus purchases of Rs.42,74,801/-.

The facts in brief are that the assessee filed the return of income on 30.09.2009 declaring an income of Rs.3,68,904/- which was processed under section 143(1) of the Act. Thereafter, the case of the assessee was reopened under section 147 of the Act by issuing notice under section 148 of the Act dated 13.03.2014 after the AO received the information from DGIT(Inv.), Mumbai and Sales Tax Department that assessee is beneficiary of hawala purchase accommodation entries from 13 parties to the tune of Rs.42,74,801/-. The statutory notices were duly issued and served upon the assessee. The assessee is engaged in the business of trading and installation of electrical items, motor engineering items and services thereof. During the course of assessment proceedings the AO called upon the assessee to prove the genuineness of these purchases. The AO also issued notice under section 133(6) of the Act dated 22.09.2014 which was returned unserved. The assessee in response to notice under section 142(1) of the Act filed before the AO the copies of bills, vouchers, delivery challans in case of a few suppliers and also bank statements highlighting the payments. The AO also required the assessee to produce these parties in person, however, the same could not be done by the assessee. Finally, the AO after following the decision of Hon’ble

In the appellate proceedings, the Ld. CIT(A) partly allowed the appeal of the assessee by directing the AO to apply a profit margin of 12.5% on the bogus purchases as the GP applied by the AO of 25% is highly expensive and unreasonable by following the decision of Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Sheth (supra) by holding that in view of the investigation carried out by the Sales Tax Department and also the fact of non service of notices issued under section 133(6) of the Act, it is undoubtedly proved that assessee has indulged in making bogus purchases.

After hearing both the parties and perusing the material on record, we observe that undisputedly the assessee is beneficiary of hawala purchase entries to the tune of Rs. 42,74,801/-. We note that the assessee has made the payments by banking channel and also placed before the authorities below the copies of bills, vouchers, delivery challans etc. After perusing the appellate order we observe that the ld CIT(A) has passed a very reasoned order by considering the decision of CIT vs. Simit P. Sheth (supra). The coordinate benches of the tribunal have been taking consistent view of applying GP rate on the alleged bogus

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