ITO-20(1)(4), MUMBAI vs. SHRI. DENESH AJMERA, MUMBAI

आअसं. 5719/मुं/2019 (िन.व.2011-12) (A.Y.2011-12) 2. Shru Sushil Kumar Mishra representing the Department submitted that the assessee had obtained bogus purchase bills amounting to Rs. 3,42,186/- from M/s Shree Durga Steel. During assessment proceedings, the assessee failed to discharge its onus in proving authenticity of the dealer and genuineness of the purchases made from said dealer. No confirmations from the dealer or any documents to prove trail of goods viz. delivery challan, stock register, etc. were filed by the assessee. The notice issued under section 133(6) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] by the AO to the dealer was received back unserved from the postal authorities with remarks ‘Not Known/Left’. The AO in a very reasoned and fair manner made disallowance of 12.5% of bogus purchases. The CIT(A) has further reduced the disallowance on bogus purchases to 5%. The ld. DR prayed for reversing the findings of CIT(A) and uphold the assessment order.

Submissions made by ld. DR heard, orders of authorities below examined. The assessee is a dealer in Iron & Steel and allied products. The assessee has allegedly obtained accommodation entries amounting to Rs. 3,42,186/- from a dealer declared as hawala operator by the Sales Tax Department, Government of Maharashtra. Undisputedly, the assessee failed to substantiate genuineness of the dealer and the purchases made from the said dealer. Since, the AO accepted the sales turnover declared by the assessee, the AO made disallowance in respect of bogus purchases by estimating Gross Profit (GP) @ 12.5% on bogus purchases. The CIT(A) reduced it to 5%. Generally, in trading of ferrous and non-ferrous metals, the GP ranges between 5% to 8%. Estimation of GP by AO is very much on higher side, the CIT(A) has made estimation of 5% taking into consideration the savings made by assessee