KAMAL HAREN SHAH,MUMBAI vs. ITO WD. 18(2)(1), MUMBAI

These two appeals by the assessee are directed against the order of Commissioner of Income Tax (Appeals) -29, Mumbai (in short ‘the CIT(A)) dated 18/03/2019 common for assessment years 2010-11 and 2011-12. Since, the facts germane to both the appeals and the grounds of appeal are similar these appeals are taken up together for adjudication and are decided by this common order.

The brief facts of the case as emanating from records are: The assessee is a dealer and stockist of tools and alloy. The assessment in the case of assessee for assessment years 2010-11 and 2011-12 were reopened on the basis of information received from the Sales Tax Department, Government of Maharashtra. As per information received the assessee had obtained bogus purchase bills amounting to Rs.2,46,44,676/- from various hawala dealers in assessment year 2010-11 and bogus purchase bills aggregating to Rs.2,53,04,428/- from dealers declared as hawala operators in assessment year 2011-12. The Assessing Officer made addition by estimating profit embedded in bogus purchases @ 12.5% of such purchases in both the impugned assessment years and made addition of Rs.3o,80,585/- in AY 2010-11 and Rs.31,75,554/-in AY 2011-12. In first appellate proceedings, the CIT(A) upheld the addition same and dismissed the appeals of assessee. Hence, the present appeals by the assessee.

The assessee has filed written submissions along with Paper Book. The contents of the written submissions are under:- “I the undersigned Mr. Kamal H Shah have respectfully submit to your honour as under:- 1. The Hon'ble CIT A (29) confirmed the addition @12.5% of purchased value in my returned Income ignoring following relevant facts: a. List of purchase creditors with relevant details were furnished during the course of assessment proceedings. b. No constructive inquiries were conducted nor any data's w.r.t. my creditors were brought on record to prove that the purchase were bogus. c. No conclusive working, evidences or basis for estimation was ever done or discussed Thus estimation @12.5% was merely or presumption & surmises which can never sustain as per several judicial pronouncements. d. My business of last more than 5 years are of same nature, same material viz. Tools, Steel and Alloy steel & with almost same traders and or their associates

Shri Sanjay J. Sethi, representing the Department vehemently defended the impugned order and prayed for dismissing both the appeals by the assessee. The ld. Departmental Representative submitted that the Assessing Officer has made addition in respect of bogus purchases by placing reliance on the decision of Hon'ble Gujarat High Court in the case of CIT vs. Simit P. Sheth, 356 ITR 451. The addition sustained by the CIT(A) is fair and reasonable therefore should be upheld.

The submission made by ld. Departmental Representative heard, written submissions filed by the assessee and orders of authorities below examined. Undisputedly, the assessee has failed to prove genuineness of purchases and the authenticity of the dealers in both the impugned assessment years. The notices sent to the dealers under section 133(6) of the Act on the addresses furnished by the assessee by the Assessing Officer were received back unserved by the postal

Taking into consideration entirety of facts, I am of the considered view that estimation of G.P by CIT(A) at 12.5% on bogus purchases is on higher side. To meet the ends of justice, addition is restricted to 6% of the bogus purchases in each of the assessment years. The impugned order is modified, accordingly. The appeals of the assessee are partly allowed in the terms aforesaid.

In the result, both appeals by the assessee are partly allowed.