ITO 26 (2)(1), MUMBAI vs. KUTUBBUDDIN Z. BHOPALWALA, MUMBAI

Notice of appeal was sent to the assessee through RPAD. The acknowledgement card available on record shows that the notice was duly served on the assessee . Despite service of notice, neither the assessee nor any authorized representative of the assessee was present in the court. It seems that the assessee is not keen pursue the appeal. Under such circumstances we are constrained to take up the appeal for adjudication with the assistance of ld. Departmental Representative and the material available on record.

The brief facts of the case as emanating from the records are: The assessee is engaged in the business of Screen Printing & Offset Printing job work on contract basis, etc. The assessment for assessment year 2010-11 was reopened by the Assessing Officer on the basis of information received from the Investigation Wing of the Department. As per the information received, the assessee had obtained bogus purchase bills aggregating to Rs.6,57,188/- from the declared hawala dealers. The Assessing Officer made addition of the entire alleged bogus purchases. Aggrieved against the assessment order dated 23/12/2015 passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 ( in short ‘the Act’ ) the assessee filed appeal before the CIT(A). The first appellate authority after considering the facts of the case, material available on record and the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Sheth reported as 356 ITR 451 restricted the disallowance to 20% of the alleged bogus purchases. Against the aforesaid findings of the CIT(A), the Revenue is in appeal before the Tribunal.

Ms. R.Kavitha, representing the Department submitted that the assessee had obtained bogus purchase bills from the hawala dealers. The assessee failed to furnish documentary evidences/details to substantiate genuineness of the purchases. Neither the parties from whom alleged purchases made were produced nor quantitative details of the stock and the trail of goods was furnished by assessee before the Assessing Officer. Thus, the Assessing Officer made addition of the entire unproved/suspicious purchases.

We have heard the submissions made by ld. Departmental Representative and have examined the orders of authorities below. The assessee had allegedly obtained bills amounting to Rs.6,57,188/- from hawala dealers. The Assessing Officer made addition of 100% of such bogus purchases. It is now a well settled legal proposition that the entire alleged bogus purchases cannot be added, it is only the profit element embedded in such alleged bogus purchases that has to be brought to tax. The Revenue has not raised any doubt over the turnover of the assessee. Thus, without inputs there cannot be production and processing. The CIT(A) after considering all these facts and the GP declared by the assessee in the preceding assessment year estimated GP on the alleged bogus purchases @ 20%. We do not find any infirmity in the impugned order, hence, the same is upheld and the appeal of Revenue is dismissed being devoid of any merit.

In the result, appeal by the Revenue is dismissed.