ITO 28 (3)(4), MUMBAI vs. VINAYKUMAR A.TIWARI, MUMBAI

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-26, Mumbai ( in short ‘the CIT(A)’) dated 22/02/2019 for the assessment year 2010-11.

The brief facts of the case as emanating from the records are: The assessee is engaged in the business of repairing ship tugs, barges, etc. on contractual basis. The assessee filed his return of income for the impugned assessment year on 10/10/2010 declaring total income of Rs.7,24,560/-. 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 by DGIT(Inv.), Mumbai from Sales Tax Department, Government of Maharashtra, the assessment for assessment year 2010-11 in the case of assessee was reopened. As per the information received, the assessee has obtained bogus purchase bills amounting of Rs.38,00,000/- during the period relevant to assessment year under appeal from two hawala dealers. During reassessment proceedings the Assessing Officer asked the assessee to prove genuineness of the purchases. The assessee failed to produce documents like octroi receipts, transport receipts, stock register, etc to show trail of goods. The assessee also failed to produce the suppliers of the goods. Even the notice sent by the Assessing Officer under section 133(6) of the Income Tax Act, 1961 ( in short ‘the Act’), to the suppliers remained unresponded. Thus, the Assessing Officer made addition of the entire bogus purchases. Aggrieved by assessment order dated 01/03/2016 passed under section 143(3) r.w.s. 147 of the Act, the assessee filed appeal before the CIT(A) challenging the addition. The CIT(A) after examining the facts and the submissions of the assessee restricted the addition to 12.5% of bogus purchases. Against the relief granted by CIT(A), the revenue is in appeal before the Tribunal.

Shri Ajay Pratap Singh, representing the Department vehemently defended the assessment order and prayed for reversing the finding of CIT(A). The ld. Departmental Representative submitted that the assessee failed to prove genuineness of the purchases and could not produce the suppliers of the goods. The ld.Departmental Representative placed reliance on the decision rendered by Hon'ble Supreme Court of India in the case of N.K. Proteins Vs. DCIT in SLP No.(C) 769 of 2017 decided on 16/01/2017 to uphold the addition made in the assessment order.

The submissions made by ld. Departmental Representative heard, orders of authorities below examined. The assessee haspurportedly obtained bogus purchase bills aggregating to Rs.38,00,000/- from declared hawala dealers . The assessee failed to prove genuineness of the purchases, therefore, the Assessing Officer made addition of entire such bogus purchases. In first appellate proceedings the CIT(A) held that since the turnover declared by the assessee has been accepted and books of account have not been rejected, entire bogus purchases cannot be added. It is only the profit embedded in the bogus purchases that has to be brought to tax. The CIT(A) estimated GP @ 12.5% on bogus purchases. (RE: PCIT vs. Paramshakhti Distributors Pvt. Ltd. in Income Tax Appeal No.413 of 2017 decided on 15/07/2019 by Hon'ble Bombay High Court ]. I concur with the findings of CIT(A) and uphold the same. The appeal of Revenue is dismissed being devoid of merit.

No appeal/cross objections filed by the assessee against the order of CIT(A) has been brought to the notice of Bench. In case any appeal/cross objections by the assessee against impugned order of CIT(A) is noticed, then this order may be recalled and the cross appeals may be listed together for disposal by a common order.

In the result, appeal by the Revenue is dismissed.