SHRI. GANPATRAM DHUDARAMJI PUROHIT,MUMBAI vs. ITO 19(1)(3), MUMBAI

The present appeal has been preferred by the assessee against the order dated 15.05.2019 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2011-12.

There are only three affective grounds raised by the assessee.

The issue raised in ground No.1 is against the ex-parte decision passed by the Ld. CIT(A). The issue raised in ground No.2 is against the reopening of assessment under section 147 of the Act whereas the issue in ground No.3 is against the 2 Shri Ganpatram Dhudaramji Purohit enhancement of income by Ld. CIT(A) to Rs.1,09,57,679/- being 100% of the bogus purchases as against Rs.13,69,710/- being 12.5% of the bogus purchases disallowed and added by the AO.

The facts in brief are that the assessee filed the return of income on 25.09.2011 declaring an income of Rs.4,46,844/- which was processed under section 143(1) of the Act. Thereafter, the case of the assessee was reopened after the AO received information from DGIT(Inv.), Mumbai that assessee is beneficiary of hawala purchase entries which is part of the scam as brought out by Sale Tax Department, Maharashtra. Accordingly, the notice under section 148 of the Act was issued on 22.09.2014 on the ground that assessee has received accommodation bills to the tune of Rs.1,09,57,679/- from six parties as mentioned by the AO on page No.2 of the assessment order. Thereafter, the AO called for various details and information from the assessee to prove the genuineness of the purchase and also issued notice under section 133(6) of the Act. The assessee furnished before the AO the copy of bills, vouchers, details of payment, stock tally etc. However, the AO was not convinced with the reply of the assessee and consequently came to conclusion that these are non genuine transactions. Finally, the AO disallowed and added the profit element in the said bogus purchase @ 12.5% thereby making of Rs.13,69,710/- to income of the assessee under section 143(3) read with section 147 of the Act dated 13.01.2016.

Aggrieved, the assessee filed appeal before the Ld. CIT(A) which was dismissed by the Ld. CIT(A) ex-parte by enhancing the addition to 100% of the bogus purchases thereby directing

After hearing the rival parties and perusing the material on record, we find that undisputedly this is a case of bogus purchases. As has been observed by the AO in the assessment order that the assessee has made purchases from six parties aggregating to Rs.1,09,57,679/-. The AO treated these purchases as non genuine and in order to assess the profit elements therein applied a rate of 12.5% on the said bogus purchases and thus added Rs.13,69,710/-. Whereas Ld. CIT(A) has enhanced addition to 100% of the bogus purchases. We note that the issue of taxability on bogus purchases is more or less settled and the various judicial forums have been applying the percentage on the bogus purchases to bring the profit element to tax. We also note that assessee has filed bills, vouchers, sale & purchase records, entries in the stock register and details of payment with the AO. Therefore, the only presumption is that the assessee might have made purchases from the grey market thereby leading to another presumption that assessee might have made some surplus by purchasing the goods from grey market. Therefore, in no case the order of Ld. CIT(A) which is ex-parte can not be sustained.

In view of these facts and circumstances, we set aside the order of Ld. CIT(A) and direct the AO to assess the income @ 12.5% of the bogus purchases.