MR. KARIMULLAH KHAN,MUMBAI vs. ITO 22 (2)(1), MUMBAI

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-34, Mumbai ( in short ‘the CIT(A)’) dated 30/01/2019 for the assessment year 2009-10.

The brief facts of the case as emanating from records are: The assessee is a manufacturer of washers. The assessee filed his return of income for the impugned assessment year on 29/09/2009 declaring total income of Rs.3,75,630/-. 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(Investigation), Mumbai, the assessment for assessment year 2009-10 in the case of assessee was reopened. As per the information received, the assessee has obtained bogus purchase bills amounting to Rs.22,73,181/- from various (4) hawala dealers. In the course of reassessment proceedings the assessee was directed to produce documents to prove genuineness of the purchases. The assessee failed to furnish vital documents such as delivery challan, transport receipts, octroi receipts, inward register, stock register, etc. to prove trail of goods. Further, the assessee failed to produce the supplier of goods. Notice issued under section 133(6) of the Act by the Assessing Officer to the suppliers were received back unserved. Thus, the Assessing Officer made addition of entire bogus purchases. Aggrieved by the assessment order dated 10/03/2015 passed under section 143(3) r.w.s. 147 of the Act, the assessee filed appeal before the CIT(A) challenging addition on merits, as well as reopening of assessment. The CIT(A) after examination of facts of the case and considering various decisions upheld the validity of reopening of assessment. As regards the addition on merits, the CIT(A) gave part relief to the assessee by restricting the addition to 25% of the total bogus purchases. Now, the assessee is in second appeal before the Tribunal assailing the finding of CIT(A) in confirming the addition @25%.

Shri Ajay Pratap Singh, representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. The ld. Departmental Representative submitted that no assessment in the case of assessee was made by the Assessing Officer hence, no opinion was formed by the Assessing Officer. On merits of the addition, the ld. Departmental Representative submitted that the assessee failed to prove genuineness of the purchase of goods and the suppliers, hence, the Assessing Officer made 100% addition of unproved purchases. The CIT(A) restricted the addition to 25%. The CIT(A) was considerate in restricting the addition to 25%.

Submissions made by ld. Departmental Representative heard, orders of authorities below examined. The assessee is a manufacturer of washers. As per contentions of the assessee the raw material purchased is utilized for manufacturing of washers. The turnover of the assessee has not been disputed by the Revenue nor the accounts of the assessee have been rejected. Without purchase of raw material manufacturing process could not have been carried out. Therefore, entire bogus purchases could not be added. It is only the profit element embedded in the bogus purchases that has to be brought to tax. The CIT(A) has restricted the addition to 25% of the bogus purchases. A perusal of the documents on record does not reveal the GP rate of the assessee either in the assessment year under appeal or in the preceding assessment years. I deem it fit and proper to restore this appeal back to the file of Assessing Officer for readjudication of the issue in line with judgment of Hon'ble Bombay High Court in the case of PCIT vs. Mohammed Haji Adam & Co in Income Tax Appeal No.1004 of 2016 decided on 11/02/2019.

In the result, appeal of the assessee is allowed for statistical purpose.