INCOME TAX OFFICER-20(1)(4), MUMBAI vs. DEEPAK KUMAR MANGILAL JAIN, MUMBAI

Aforesaid appeal is a recalled matter since the appeal was initially disposed-off by the Tribunal as low-tax effect case vide common order dated 21/08/2018. However, the order has been recalled vide MA No.303/Mum/2019 order dated 28/02/2020 since it was pointed out by the revenue that the case was covered by exception 3(e) of CBDT Circular dated 20/08/2018. Accordingly, the case has come up for fresh hearing before this bench.

The revenue assails the order of Ld. Commissioner of Income Tax (Appeals)-32, Mumbai [in short CIT(A)] dated 29/05/2017 which has provided certain relief to the assessee on account of alleged bogus purchases.

Though none appeared for assessee, however, material on record was sufficient for disposal of the appeal. The Ld. DR pleaded for restoration of assessment framed by Ld. AO. 4.1 The material facts are that the assessee being resident individual stated to be engaged as retailer of ferrous and non-ferrous metal under proprietorship concern namely M/s Narayan Metal India was assessed for the year under consideration u/s 144 r.w.s. 147 on 07/03/2016. The original return filed by assessee was processed u/s 143(1). However, pursuant to receipt of certain information from DGIT (Inv.) / Sales Tax Department, Mumbai, it transpired that the assessee made alleged bogus purchases of Rs.63.54 Lacs from thirteen entities as detailed in the assessment order. Accordingly, the case was reopened as per due process of law and the assessee was required to file requisite details to substantiate the purchases. 4.2 The assessee could not filed documentary evidences in support of purchases which led Ld. AO to disallow the purchases of Rs.63.54 Lacs while framing the assessment.

Before Ld. CIT(A), the assessee pointed out that the notices were issued by Ld. AO at old Ahmedabad address and therefore, the proceedings could not be attended to by the assessee. On merits, it was submitted that the additions made by Ld. AO would yield unrealistic Gross Profit Rate of more than 49%.

The Ld. CIT(A), after considering assessee’s submission as well as after going through catena of judicial decisions including the decision of Hon’ble Gujarat High Court in Simit P.Sheth V/s CIT (2012; 356 ITR 451), came to a conclusion that the assessee procured accommodation bills from these suppliers whereas the goods were procured in cash from other parties. In such a case, profit element embedded in these transactions was to be brought to tax. The estimation was made @12.68% which was nothing but Gross Profit rate shown by the assessee during the year. Aggrieved, the revenue is in further appeal before us.

Going by the factual matrix as enumerated in the orders of lower authorities, we find that the Sales Turnover was not in doubt and there could be no sale without actual purchase of material keeping in view the assessee’s nature of business. The facts of the case made it a fit case to estimate the profit element embedded in these transactions. The Ld. CIT(A), after due consideration of assessee’s submissions as well as material on record, estimated the additions @12.68% which is more than enough to take care of the leakage of revenue. Therefore, the estimation could not be termed as unjustified, in any manner. Finding no reason to interfere in the impugned order, we dismiss the appeal.

The appeal stands dismissed. Order pronounced on 02nd June, 2021. (Mahavir Singh) (Manoj Kumar Aggarwal) उपाध्यक्ष / Vice President लेखा दस्य / Accountant Member