ITO 19(2)(5), MUMBAI vs. PRATAPCHAND PRABHUJI PUROHIT , MUMBAI

For the sake of convenience, the facts are extracted from Assessment Year 2009-10.

The brief facts of the case as emanating from records are: The assessee is a dealer in ferrous and non-ferrous materials. The assessment for Assessment Year 2009-10 was reopened in the case of assessee on the basis of information received by DGIT (Inv), Mumbai from Sale Tax Department, Government of Maharashtra that the assessee has indulged in obtaining bogus purchase bills to the tune of ₹70,26,403/- from notified hawala dealers. In reassessment proceedings, the Assessing Officer concluded that the assessee is in practice of purchasing goods from grey market and thereafter obtaining bogus purchase bills from entry providers. Since, the sales made by the assessee were not disputed, the Assessing Officer estimated Gross Profit at the rate of 12.5% on bogus purchases and made addition of ₹8,78,300/-.

Aggrieved by the assessment order dated 08.03.2015 passed under section 143(3) read with section 147 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), the assessee filed appeal before the CIT(A). The CIT(A) after considering the decisions of Tribunal on identical issue restricted the addition to 5% of alleged non

Shri Saurabh Rai representing the Department, vehemently defended the assessment order and prayed for reversing the finding of CIT(A). The learned Departmental Representative submitted that the assessee could neither produce parties nor the assessee could show trail of goods. The learned Departmental Representative asserted that while passing the assessment order the Assessing Officer has pointed various defects in the documents produced by the assessee. The CIT(A) in the impugned order while granting relief to the assessee has not rebutted the findings of the Assessing Officer. The learned Departmental Representative further pointed that in assessment proceedings, the assessee voluntarily agreed for 12.5% disallowance on non-genuine purchases. Once, the assessee has agreed for the addition there was no question of granting further relief to the assessee.

Submissions made by the learned Departmental Representative heard and the orders of the authorities below examined. The assessee is engaged in trading of ferrous and non-ferrous metals. Undisputedly, the assessee has indulged in obtaining accommodation entries from hawala operators. As has been observed by the Assessing Officer the modus operandi of the assessee was to make purchase from grey market and thereafter obtain corresponding bogus purchase bills from hawala dealers. The sales made by the assessee are not disputed by the Revenue. Thus, in such transactions, it is only the profit element embedded in bogus entries that has to be brought to tax. The assessee