SHRI HASMUKH J. RUPARELIA,MUMBAI vs. ITO WARD-22(1)(5), MUMBAI

ITA Nos. 1854-1856/Mum/2019 Page | 2 आदेश / O R D E R महावीर स िंह, उपाध्यक्ष / PER MAHAVIR SINGH, VP: These appeals of assessee are arising out of the order of Commissioner of Income Tax (Appeals)- 34, Mumbai in Appeal No. CIT(A)- CIT(A)-34/ITO-22(1)(5)/IT-367,369 & 368/2015-16 dated 11.12.2018. The Assessments were framed by the Income Tax Officer, Ward-22(1)(5), 22(2)(1) Mumbai (in short ITO/ AO) for AYs 2010-11 & 2011-12 vide even date 26.03.2015 & 23.03.2015, under section 143(3) r.w.s 147 of the Income-tax Act, 1961 (hereinafter ‘the Act’).

2. The only common issue in these three appeals of assessee is as regards to the order of CIT(A) confirming the disallowance of purchases from alleged suspicious dealers by estimating the profit rate of 12.5% on the bogus purchases. For this, the assessee has raised the identical worded grounds in all the years except quantum and the facts and circumstances of the case are also identical. Hence, I will take the facts from Assessment Year 2010-11 in . The relevant ground in Assessment Year 2010-11 read as under: - “1. On the facts and in the circumstances of the case, the Commissioner of Income-tax (Appeals), hereinafter referred to as the "CIT (A)", has erred in confirming the disallowance on account of purchases from alleged suspicious dealers to the extent of Rs. Page | 3 8,09,948/-, being 12.5% if the purchases made from the said dealers.

5. In view of the above, the appellant prays that the impugned disallowance shall be deleted / reduced to a reasonable level considering the facts and circumstances of the case.”

I have heard the learned Departmental Representative and 3. gone through the facts and circumstances of the case. Briefly Page | 4 stated facts are that the assessee is engaged in the business of supplying of construction material. The Assessing Officer during the course of assessment proceedings received information from sale tax department Govt. of Maharashtra that the assessee has made purchases from the following parties who indulge in issuing bogus bills without supply of any goods or materials for commission. The following are the parties and the total amount amounting to Rs. 64,79,583/-:-

Sl NO. Name of the purchase party Amount of purchase 1. Liberty Trading Company 7,50,249 2. Global Trade Impex 12,43,643 3. Atlas International (I) 9,02,272 4. Seemant Trading Co. 10,40,336 5. Premier Enterprise 12,33,187 6. Nirmal Metal Enterprise 7,99,404 7. Aarco Enterprises 5,10,492 Total 64,79,583 4. The Assessing Officer noted that the sale Tax Department carried out a detailed inquiry in respect of the above parties and is of the view that these concerns are engaged in providing bogus bills accommodation entries and assessee is one of the beneficiaries who has made above purchase of `64,79,583/-. The assessee submitted the complete details and furnished all relevant evidences to establish that goods have actually been delivered / supplied and also furnished the books of account, the stock register and evidence regarding payment made through account payee cheque like bank statement etc. but according to Assessing Officer, the assessee could not produce the details of transportation like transportation receipts delivery challans or lorry receipts. Accordingly, The Assessing Officer Page | 5 was of the view that these purchases are not genuine purchases but the assessee’s sales are not doubted. Hence, he estimated the profit by applying profit rate at the rate of 12.5% in view of the decision of Hon’ble Gujarat High Court in the case of the case of CIT vs. Smith P. Seth (2013) 356 ITR 451 (Guj). Aggrieved, assessee preferred the appeal before CIT(A), who confirmed the order of Assessing Officer except restricting the profit rate at the rate of 12.5% in the case of M/s Maulik Steel Corporation wherein the Assessing Officer has made addition of entire purchases of `27,98,636/-. The relevant finding of the CIT(A) in Para 5.6 read as under:-

5.6. In view of the above, it is an admitted fact that Sales Tax Department has conducted search and seizure operation and has established large number of companies/ firms/partnership concerns as hawala dealers who are engaged in accommodation entries without actually supplying the goods. The appellant is one of the beneficiary and has received such accommodation bills from one of the hawala operators totaling to Rs. 33,82,929/-. The A.O. attempted to verify such parties by making independent enquiries u/s. 133(6) of the I.T. Act, 1961. However, no reply was received from them. The appellant filed certain details such as purchase bills, ledger account, bank statement etc. However, some of the specific details required to establish the genuineness Page | 6 of purchase such as evidence of transportation of goods, entry of goods in the stock register, one to one consumption pattern of alleged purchase items, confirmation from the parties concerned etc could not be submitted before the A.O. Nor the Principle Officers of these concerns were produced before the A.O. for examination. However, it is also a fact that the A.O. has not questioned the total sale component and if there is a sale, there should be purchase. The appellant being a trading concern has indulged in using such accommodation entry. As evident from catena of judgments on bgus purchases, only the benefit derived by using such accommodation entries has to be brought to tax. The advantages from using such bogus bills are in the form of saving VAT, saving of transportation charges and various taxes etc. The A.O. has rightly disallowed part of the purchases claimed such hawala dealers relying on the the ratio of the judgement of Hon'ble Gujarat High Court in the case of Simit P. Seth 356 ITR 461 (Guj.) which is applicable to the facts and circumstances of the appellant's case. Thus, the disallowance made by the A.O. is upheld in principle. However, in the case of purchase from M/s.Maulik Steel Corporation, the A.O has added the entire purchases of Rs.29,98,636/-. The 'ame is restricted to ITA Nos. 1854-1856/Mum/2019 Page | 7 12.5%. Accordingly, the entire disallowance made by the AO of Rs.33,82,929/- is restricted to Rs.7,59,122/- Thus, the ground of appeal raised is partly allowed.

Aggrieved, now assessee is in appeal before Tribunal.