VIKESH BABULAL JAIN,MUMBAI vs. ITO 19 (3)(5), MUMBAI

Shri Satish R. Mody appearing on behalf of the assessee submitted that the assessee is engaged in trading of ferrous and non-ferrous metals. The assessment in the case of assessee for AY 2009-10 was re-opened on the basis of information

Aggrieved by the assessment order dated 23.03.2015 passed under section 143(3) read with section 147 of the Income Tax Act, 1961 ( hereinafter referred to as ‘the Act’). The assessee filed appeal before the CIT(A). The CIT(A) without appreciating facts and the gross profit (GP) declared by the assessee confirmed the addition at 12.5%. The ld. AR pointed that the assessee has declared GP of 2.85% of the total sales. The GP earned by the wholesalers in this line of business is 2.5% to 3.5%. The ld. AR further submitted that the appeal may be decided in accordance with the judgment of Hon’ble Bombay High Court in the case of PCIT vs. Mohd. Haji Adam & Co. in of 2016 decided on 11.02.2019.

Per contra, Ms. Smita Verma representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. The ld. DR submitted that the assessee has failed to discharge his onus in proving genuineness of the purchases and the dealers. Notices were issued to the dealers under section 133(6) of the Act by the AO on the addresses furnished by the assessee. Notices were received back unserved as the addresses were either incomplete or incorrect. Further, the assessee failed to prove trail of goods as no Octry receipt, transport receipt, delivery challanes, inward register etc. were आअसं. 6450/मुं/2019 (िन.व.2009-10) (A.Y.2009-10)

Both sides heard, orders of authorities below examined. The assessee has allegedly obtained bogus purchase bills amounting to Rs. 1,32,99,452/- from declared hawala operators. During assessment proceedings, the assessee could neither produce dealers nor any confirmations from the dealers were furnished by the assessee. Thus, the assessee failed to prove the authenticity of the dealers and genuineness of the purchases.

The Hon’ble Bombay High Court in the case of PCIT vs. Paramshakti Distributors Pvt. Ltd. in of 2017 decided on 15.07.2019 has held that in the case of bogus purchase transactions, it is only the profit embedded in such purchases has to be brought to tax. In the present case, estimation of GP on bogus purchase at 12.5% by the AO/CIT(A) is on the higher side. Generally in trading of ferrous and non-ferrous metals, the GP ranges between 5 to 8%. Taking into consideration, entirety of facts, I am of considered view that estimation of GP at 5.5% of total bogus purchases would meet the ends of justice. The impugned order is modified accordingly.

In the result, appeal of the assessee is partly allowed in the terms aforesaid.