DINESHKUMAR CHUNNILAL MEHTA,MUMBAI vs. ITO 18(1)(4), MUMBAI

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ITA 3974/MUM/2019Status: DisposedITAT Mumbai03 February 2021AY 2010-114 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal found that the addition of 12.5% on bogus purchases was on the higher side for the nature of the assessee's business. It directed that the addition be restricted to 6.5% to serve the ends of justice.

What were the facts?

The assessee, a metal trader, had his assessment reopened based on information of bogus purchases from hawala dealers. He failed to provide substantiating documents for these purchases.

What were the issues?

Whether the addition made on account of bogus purchases was justified and if the rate of profit estimation was appropriate.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 143(3),Section 147

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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Before: SHRI VIKAS AWASTHY

For Respondent: Shri Sanjay Sethi

आदेश/ ORDER

1.

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-53, Mumbai ( in short ‘the CIT(A)’) dated 02/04/2019 for the assessment year 2010-11.

2.

The brief facts of the case as emanating from records are: The assessee is a trader in ferrous and non-ferrous metals. The assessee filed his return of income for impugned assessment year on 26/06/2010 declaring total income of Rs.3,49,540/-.

The return of the assessee was processed under section 143(1) of the Income Tax Act, 1961(in short ‘the Act’). On the basis of information received from Sales Tax Department, Government of Maharashtra by DGIT(Inv.), Mumbai, the assessment in the case of assessee for assessment year 2010-11 was reopened. As per information received the assessee had obtained bogus purchase bills aggregating to Rs.21,72,700/- from various hawala dealers. In reassessment proceedings the assessee was asked to furnish documents to substantiate purchase of goods from hawala dealers. Since, the assessee failed to furnish vital documents viz. Delivery challans, transport receipts, excise gate pass, stock register, etc. to prove trail of goods and also the confirmations from the hawala dealers, the Assessing Officer held that the purchases made from hawala dealers were bogus. The Assessing Officer made estimated addition @ 12.5% on inflated purchases. Aggrieved by the order dated 24/02/2016 passed under section 143(3) r.w.s 147 of the Act, the assessee filed an appeal before CIT(A). The First Appellate Authority after considering the submissions of assessee confirmed the addition made in assessment order. Now, the assessee is in second appeal before the Tribunal against the addition confirmed by CIT(A).

3.

Shri Sanjay Sethi, representing the Department vehemently defended the impugned order . The ld. Departmental Representative submitted that the assessee has failed to prove genuineness of the suppliers and transactions with declared hawala dealers. The Assessing Officer following the decision rendered in the case of CIT vs.Simit P. Sheth, 356 ITR 451 (Guj) estimated profit @ 12.5% on inflated purchases and thus, made addition of Rs.2,71,588/-. The ld. Departmental Representative submitted that the addition made by Assessing Officer in respect of bogus purchases is fair and reasonable. The CIT(A) after examining the facts and submissions of assessee has upheld the addition.

4.

The submissions made by ld. Departmental Representative heard and the orders of authorities below examined. The addition of Rs.2,71,588/- has been made in the case of assessee on account of bogus purchase transactions undertaken by the assessee during the period relevant to assessment year under appeal. Undisputedly, the assessee failed to amplify genuineness of purchases made from hawala dealers. The assessee could not furnish cogent documents to prove that the goods were indeed delivered to the assessee or at the designated place at the instructions of assessee. Even confirmations from the hawala dealers who had allegedly supplied the goods were not filed. Hence, the Assessing Officer made addition of Rs.2,71,588/- by estimating GP @12.5% on inflated purchases. The same was upheld by the CIT(A). Considering the nature of assessee’s business ( trading in ferrous and non-ferrous metals) estimation of GP @ 12.5% on bogus purchases is on higher side. The average G.P in trading of ferrous and non-ferrous metals is generally between 5% to 8%. Taking into consideration entirety of facts, if the addition is restricted to 6.5% the same would serve the ends of justice. I hold and direct accordingly.

5.

In the result, impugned order is modified and appeal by the assessee is partly allowed.

Order pronounced in the open Court on Wednesday the 03rd day of February, 2021.

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