ITO 26(2)(3), MUMBAI vs. MOHD TALIB MAHBOOB GHONIA, MUMBAI

The present appeal has been preferred by the Revenue against the order dated 31.12.2018 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11.

The only issue raised by the Revenue is against the part deletion of addition by Ld. CIT(A) to the tune of 87.5% of the total bogus purchases as against 100% addition made by the AO towards bogus purchases.

The facts in brief are that the assessee filed the return of income on 15.10.2010 declaring a total income of Rs.12,49,340/- which was processed under section 143(1) of the 2 Shri Mohd Talib Mahboob Ghonia Act. Thereafter, the case of the assessee was reopened under section 147 of the Act by issuing notice under section 148 dated 09.03.2015 after the AO received information from DGIT (Inv.) wing, Mumbai that assessee is a beneficiary of hawala purchase entries from 9 parties which are mentioned in para 4 of the assessment order, aggregate whereof comes to Rs.95,70,489/-. Accordingly, during the course of assessment proceedings the assessee was required to furnish the necessary evidences to prove the genuineness of the purchases. The assessee did not respond to the communication from the AO and finally the AO added the entire bogus purchases of Rs.95,70,489/-in the ex- party assessment order passed under section 144 read with section 147 of the Act vide order dated 27.01.2016.

In the appellate proceedings, the Ld. CIT(A) partly allowed the appeal of the assessee sustaining the addition to the extent of 12.5% of the bogus purchases on the ground that it is only the profit embedded in the bogus purchases which can be brought to tax and not the entire purchases. In partly allowing the appeal of the assessee, the Ld. CIT(A) followed the order of Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Sheth (2013) 356 ITR 451 (Guj) wherein it has been held that only the profit element can be placed and not the entire purchases.

Aggrieved by the order of Ld. CIT(A) the Revenue preferred an appeal before the Tribunal.

After hearing both the parties and perusing the material on record, we observe that undisputedly the assessee is beneficiary of hawala purchase entries from 9 parties the details whereof are 3 Shri Mohd Talib Mahboob Ghonia given in para 4 of the assessment order from whom aggregate purchase of Rs.95,70,489/- were made. The assessee did not cooperate during the assessment proceedings despite AO granting several opportunities to the assessee and finally the assessment was framed ex-parte under section 144 read with section 147 of the Act. Thereafter, the Ld. CIT(A) partly allowed the appeal of the assessee to the extent of 12.5% of the bogus purchases by following the decision of Hon’ble Gujarat High Court in the case stated hereinabove. After considering the facts on record and perusing the order of Ld. CIT(A), we are of the considered view that Ld. CIT(A) has passed a very reasoned order directing to assess the profit element on the bogus purchases at 12.50%. Therefore, we are inclined to uphold the same by dismissing the appeal of the Revenue.

In the result the appeal of the revenue is dismissed. Order pronounced in the open court on 22.01.2021.