INCOME TAX OFFICER WARD 28(3)(3), MUMBAI vs. SURESHKUMAR N. KADRI, MUMBAI

The only issue in this appeal of revenue is against the order of CIT(A) restricting the addition made by Assessing Officer by applying the profit rate at 12.5% of the bogus purchase. For this, Revenue has raised following ground: - “(1) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the A.O. to restrict the addition of bogus purchases to 12.5% as against addition of 100% made by the Assessing Officer on account bogus purchases without appreciating the fact that parties from whom these purchases were made proven accommodation entry providers, as concluded by Sales Tax Authorities pursuant to the investigation carried out by them?”

Briefly stated facts are that the assessee engaged in the business of Industrial Valves Manufacturing. The AO received information from DGIT (Investigation), who in turn received information from Sales Tax Department, Mumbai that the assessee has made purchases from hawala parties, as listed in hawala dealers by the Maharashtra Sales Tax Department who are providing bogus bills of purchase amounting “Sl Name of party Amount No. 1. Donear Trading Pvt. Ltd. 1,45,775 2. Siddhivinayak Steel 67,500 3. G.K. Industrial Corporation 12,78,179 4. Asian Steel 1,16,100 5. Ridhi Sales Corporation 6,62,018 6. Nimesh Steel Private Limited 10,70,016 Total 33,39,588

The AO issued noticed under section 133(6) to the parties which returned back with the remark as “left” and assessee failed to produce these parties. During the course of assessment proceedings and during appellate proceedings, the assessee submitted all the documentary evidences such as inward register, stock register, payment received against such sales, receipt of material purchases, account payee cheque. According to the AO, the assessee failed to establish the genuineness of the purchase and accordingly, he made addition of unproved purchase at Rs. 33,39,588/- to the return income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who restricted the disallowance at 12.5% of the bogus purchases by observing in para 7 by following the decision of Hon‟ble Gujarat High court in the case of CIT vs. Smith P. Seth (2013) 356 ITR 451 (Guj) by observing as under: -

We have considered the issue and gone through the facts and circumstances of the case. Before us, the assessee has filed copy of Tribunal order in assessee‟s own case for Assessment Year 2009-10 in vide dated 30.08.2019, wherein Tribunal has accepted the restriction of 12.5% net profit on the alleged bogus purchase and for this Tribunal observed in Para 5 as under: - “5. We have heard the argument advanced by the Ld. Representative of parties and perused the record. The AO raised the addition on the basis of this fact that the assessee failed to provide the satisfactory documents in support of alleged purchases and also failed to produce the parties. In the present case, the AO raised the 100% addition of the bogus purchases which was confirmed by CIT(A). In the instant case, the sale is not doubted. No sale could be done without actual purchases. It is settled law when sales are not doubted then 100% उप/सहायकपुंजीकार (Asstt.Registrar) आयकरअपीऱीयअधिकरण, भुिंफई / ITAT, Mumbai