ITO, 33(1)(1), MUMBAI vs. SHRI AKSHAY PRAMODRAI GHANDHI, MUMBAI

Inspite of notice none appeared on behalf of the assessee nor any adjournment was sought by the assessee. Therefore, we proceed to dispose off this appeal on hearing the Ld. DR on merits.

Heard Ld. DR, perused the orders of the authorities below. On a perusal of the order of the Ld.CIT(A), I find that the Ld.CIT(A) considered this aspect of the matter elaborately with reference to the submissions of the assessee and the averments in the Assessment Order restricted the disallowance to 12.5% of the non-genuine purchases of ₹.11,67,812/-, while holding so, the Ld.CIT(A) observed as under: - “4.2 I have considered the assessment order and the submissions of the appellant including the case laws cited. The appellant produced the details with regard to purchases made from the parties and copy of bank statement indicating the payment made to the seller parties. However, the AO added 100% as bogus purchases. AO based his assessment on the lone statement given by the vendor before the Sales tax department that too without giving cross examination opportunity to the appellant. Hon. Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central (A.Y: 2009-10) Shri Akshay Pramodrai Ghandhi Excise (2015) 281 CTR 241 (SC) has reaffirmed the principles of natural justice and held that the opportunity of cross examination of witness is must in a case where some adverse inference is to be drawn against the assessee. 4.3 It is seen that many Benches of ITAT and Hon'ble High Courts have held that when purchases are supported by sufficient documentary evidences, then merely because of non-appearance before the AO, one cannot conclude that the purchases were not made by the assessee. In the case of Nangalia Fabrics 40 taxmann.com 206, Gujarat High Court has held that where purchases were supported by the bills, entries were made in the books of accounts and payment was made by cheque, the said purchases could to be held as bogus. Hon'ble ITAT, Mumbai, has upheld estimation out of alleged bogus purchases instead of addition of total purchases in number of cases. 4.4 The assessee is not a manufacturer but he is a trader. In case of NK Proteins 250 taxman 22(SC), signed blank cheque books of the suppliers were found with the buyer and the material were entered in the stock without actually receiving the same to inflate the raw material. Therefore the decision of the Supreme Court in the case of N K Proteins Ltd. would not apply in this case. Further NK Proteins was a manufacturer. No business gives entire purchases as profits particularly in the trading business the margins are very low in a competitive market. In all probability in such cases the assessee obtains the material through the brokers in the market. The buyer (the assessee here) does not know the actual supplier but the material is received. The broker arranges the bills again from the market which may be a dummy entity. In this process the assessee may have made some additional profit. Therefore, the saving on account of VAT and other incidental charges made by the appellant on the said bogus purchases can be brought to tax as additional profit. In the case of CIT vs. Simit P Sheth, 356 ITR 451, Hon'ble Gujarat High Court has upheld estimation @ 12.5% of alleged bogus purchases. Keeping in view the totality of facts and circumstances of the case, the addition made by AO is restricted to 12.5% of such purchases of Rs. 11,67,812, which comes to Rs.1,45,976. The AO is directed to modify the addition accordingly and the appellant gets part relief. These grounds are partly allowed.”

On a careful perusal of the order of the Ld.CIT(A) and the reasons given therein, I do not find any infirmity in the order passed by the (A.Y: 2009-10) Shri Akshay Pramodrai Ghandhi Ld.CIT(A) in restricting the addition/disallowance to the extent of 12.5% of the purchases. Grounds raised by the revenue are dismissed.

In the result, appeal of the Revenue is dismissed.