ASSISTANT COMMISSIONER OF INCOME TAX -23(2), MUMBAI vs. M/S KTC CO, MUMBAI

Shri Sushil Kumar Mishra representing the Department submitted that the assessee is engaged in diamond business. On the basis of information received from DGIT(Invn.), Mumbai that the assessee has indulged in obtaining accommodation entries to the tune of Rs.89,36,609/- during the period relevant to assessment year under appeal, the assessment was reopened. The assessee has taken the benefit of accommodation entries from M/s. Mohit International, a company controlled by Praveen Kumar Jain, a declared hawala operator. The assessee failed to produce documents to substantiate genuineness of the transactions. The Assessing Officer made addition of 12.5% of non-genuine transactions. The assessee carried the issue in first appeal before the CIT(A), who has reduced the addition to 8% of total bogus purchases. The ld. Departmental Representative submitted that the Assessing Officer has been quite considerate in making the addition @ 12.5% of bogus purchases. The addition was made by the Assessing Officer in accordance with the judgment of Hon'ble Gujarat High Court in the case Bholanath Polyfab Pvt. Ltd., 40 Taxman 494. The ld. Departmental Representative prayed for reversing the findings of CIT(A) and sustaining the addition made in assessment order.

Submissions made by ld. Departmental Representative heard, orders of authorities below examined. The Revenue in appeal has raised solitary ground assailing the findings of CIT(A) in restricting the addition on account of bogus purchases to 8% of such purchases. The assessee has allegedly obtained accommodation entries amounting to Rs.89,36,609/- from M/s. Mohit International. During assessment proceedings, the assessee produced ledger accounts, invoices, copy of bank statements reflecting payments made, etc. However, the assessee neither produced the supplier nor any confirmation from the suppliers. Further, the assessee failed to discharge is onus in proving trail of goods. The profit element embedded in such like transactions has to be brought to tax. The Assessing Officer made addition of Rs.11,17,076/- by estimating GP on bogus transactions @ 12.5%. In first appeal, the CIT(A) after taking cognizance of G.P ratio declared by the assessee at 5.36% restricted the addition to 8% of the bogus purchases. In my considered opinion, keeping in view the business of assessee GP estimated by the Assessing Officer is on higher side. I find no infirmity in the impugned order, hence, the same is upheld and the appeal of Revenue is dismissed being devoid of merit.

In the result, appeal by the Revenue is dismissed.