SHRI. RAVINDRA BHASKAR DESHMUKH,KALYAN vs. DY. CIT, PANVEL

The assessee has filed the above mentioned appeals against the order dated 04.02.2019 passed by the Commissioner of Income Tax (Appeals) -2, Thane [hereinafter referred to as the “CIT(A)”] relevant to the A.Ys. 2010-11 & 2011-12.

The assessee has filed the present appeal against the order dated 04.02.2019 passed by the Commissioner of Income Tax (Appeals) -2, Thane [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2010-11. ITA Nos. 1951 & 1952/M/2019 A.Ys.2010-11 & 2011-12 3. The assessee has raised the following grounds: -

Brief facts of the case are that the assessee filed his return of income on 02.10.2010 declaring total income to the tune of Rs.93,41,260/- excluding agricultural income of 12,76,100/-. The return of income was processed u/s 143(1) of the I. T. Act, 1961. Thereafter, the case of the assessee was reopened u/s 148 of the I. T. Act, 1961 on 16.07.2013. Notice u/s 148 of the Act after recording the reason as the assessee had made bogus purchase in order to inflate the expenses. Thereafter, the notices u/s 143(2) & 142(1) of the Act on 26.09.2014 were issued and served upon the assessee. The assessee was engaged in the business as Civil Contractor under the proprietary concern M/s. R. B. Deshmukh. During the year under consideration, the assessee has shown net profit of Rs.93,68,340/- on a total sale /receipts of Rs.14,86,75,331/- which worked out to 6.30% of total sales/receipts. The total income of the assessee was assessed to the tune of Rs.1,25,04,010/-. Feeling aggrieved, the assessee has filed an appeal before the CIT(A) who partly allowed the claim of the assessee, but, the assessee was not satisfied, therefore, the assessee has filed the present appeal before us. A.Ys.2010-11 & 2011-12 5. We have heard the argument advanced by the Ld. Representative of the Department and perused the record. The Ld. Representative of the revenue has argued that the CIT(A) has wrongly reduced the addition to the extent of 25% of the alleged bogus purchase, therefore, the finding of the CIT(A) is not justifiable, hence, is liable to be set aside. In the instant case, the AO issued the notices to the parties u/s 133(6) which were not served. Thereafter, the AO asked the assessee to produce the parties to which the assessee failed to produce the same. However, the assessee produced the documents in which it has been showed that the payment was made to the parties by cheque. The assessee also produced the necessary documents showing that the material was received and utilized. The assessee also produced the ledger account, copies of bill for purchase from M/s. Tara Enterprises and M/s. Kotsons Impex, Bank Statements of purchase with quantity details and amounts and sales invoices, delivery challan and ledger account. No further enquiry was done. Sale is not disputed. The books of account has not been rejected. The Hon’ble High Court of Gujarat in case CIT Vs. Simit P. Sheth (2013) 356 ITR 451 (Guj) has held that the profit embedded to the purchase is liable to be added to the income of the assessee in the interest of justice. It is specifically held that the whole addition of bogus purchase is not justifiable. There are number of decisions in which it is specifically held that in case of bogus purchase the addition is liable to be justifiable to the extent of profit element. Some judgements are hereby mentioned below.