SHRI. SURESH KUMAR H BHANSALI,MUMBAI vs. ITO 19(3)(4), MUMBAI

Shri S.L. Jain appearing on behalf of the assessee submitted that: The assessee is engaged in trading of ferrous and no-ferrous metals. The assessment in the case of assessee for assessment year 2009-10 was reopened on the basis of information received by the DGIT Inv. Mumbai from the Sales Tax Department, Government of Maharashtra. As per the information received, the assessee had obtained accommodation entries to the tune of Rs.47,83,212/-from various hawala operators. The Assessing Officer made addition of the entire alleged bogus purchases. Aggrieved by the assessment order dated 05/03/2015 passed under section 144 r.w.s. 147 of the Income Tax Act,1961 ( in short ‘the Act’), the assessee filed appeal before the CIT(A). The CIT(A) in ex-parte proceeding confirmed the addition in toto. The ld. Authorized Representative of the assessee placed reliance on various decisions of the Tribunal to contend that addition to the extent of 2% on bogus purchases be sustained.

Per contra, Shri Sanjay Sethi, representing the Department vehemently defended the impugned order and prayed for dismissing the appeal by the assessee. The ld. Departmental Representative submitted that the assessee has been non- cooperative during assessment proceedings and even in the proceedings before CIT(A). Repeated notices were served on the assessee but the assessee deliberately failed to appear. The assessee was given ample opportunity to substantiate genuineness of purchases and the supplier, but, the assessee choose not to appear before the Assessing Officer and the CIT(A), hence, entire bogus purchases were added in the hands of assessee.

Both sides heard, orders of authorities below examined. On merits of the addition, I find that the turnover declared by the assessee has been accepted by the Assessing Officer. The assessee is a trader in ferrous and non-ferrous metals. Without purchases there cannot be sales. Once the sales have been accepted, entire purchases cannot be disallowed. The profit element embedded in such purchases is to be taxed. In the present case, it appears that the assessee made purchases from grey market and thereafter, obtained bogus purchase bills from hawala operators. Generally, the GP in trading of ferrous and non-ferrous metals range between 5% to 8%. Taking into consideration entire facts of the case, addition is restricted to 8% of bogus purchase. The ground No.1 of the appeal is partly allowed, accordingly.

It would be relevant to observe here, that the assessee never participated in assessment proceedings, therefore, the Assessing Officer was constrained to pass the assessment order under section 144 of the Act. Even in first appellate proceedings, the assessee failed to appear despite repeated service of notices. No written submissions were filed by the assessee, either. The conduct of the assessee reflects that the assessee is a recalcitrant, and has scanty respect for the law of land.

In ground No.2 of the appeal, the assessee has challenged levy of penalty under section 271(1)(c) of the Act. The challenge to penalty proceedings at this stage is premature, the ground is dismissed accordingly.

In ground No.3 of the appeal, the assessee has assailed charging of interest under section 234A, 234B and 234C of the Act. The charging of interest under aforesaid sections is mandatory and consequential, therefore, ground No.3 of the appeal is dismissed.

The ground No.4 of appeal is general, hence, requires no adjudication.

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