ITO 26 (2)(3), MUMBAI vs. NALIN OMPRAKASH PAHUJA, MUMBAI

The brief facts of the case as emanating from record are: The assessee is engaged in the business of manufacturing engineering goods and is 100% export oriented unit. The assessment for assessment year 2009-10 was re- opened by the Assessing Officer on the ground that assessee has obtained bogus purchase bills aggregating to Rs.34,86,460/- from the declared hawala dealers. The Assessing Officer made disallowance of 25% of the alleged non- genuine purchases i.e. Rs.8,71,615/-. Aggrieved against the assessment order dated 04/03/2016 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 examining the facts and documents on record granted part relief to the assessee by restricting the disallowance to 12.5% 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 Assessing Officer in a very fair and justified manner had made disallowance in respect of bogus purchase bills obtained by the assessee at 25% of such bogus purchases. The CIT(A) has further reduced the disallowance to 12.5% of the bogus purchases without considering the fact that the average GP of the assessee for assessment years 2007-08, 2008-09, 2011-12 and 2012-13 is 12.74% and the GP declared by the assessee in the impugned assessment year is 17.17%. The ld. Departmental Representative contended that the GP determined by the Assessing Officer on the bogus purchases at 25% is fair and justified.

On the other hand, Shri Pramod A. Rasam, appearing on behalf of the assessee vehemently defended the impugned order and prayed for dismissing the appeal of the Revenue. The ld. Authorized Representative for the assessee submitted that the CIT(A) had estimated GP at 12.5% on alleged bogus purchases after considering all the facts including the average GP of the assessee in the past and the subsequent assessment years, as well as the GP declared by the assessee in the impugned assessment year. The ld. Authorized Representative for the assessee prayed for upholding the impugned order and dismissing the appeal of Revenue.

We have heard the rival sides and have perused the orders of authorities below. The assessee has allegedly obtained bogus purchase bills aggregating to Rs.34,86,460/-. The Assessing Officer has made disallowance of 25% on the aggregate alleged bogus purchases. On appeal, the CIT(A) has reduced the disallowance on the alleged bogus purchases to 12.5%. We have observed that average of GP as declared by the assessee in assessment years 2007-08, 2008- 09, 2011-12 and 2012-13 is 12.74%. The GP declared by the assessee in the impugned assessment year is 17.17%. The GP estimated by CIT(A) @ 12.5% on the alleged bogus purchases , is very close to the average of the GP in the preceding and succeeding assessment years. Taking into consideration entirety of facts, we find no reason to interfere with the findings of CIT(A), hence, the same are upheld and the appeal of the Revenue is dismissed.

In the result, appeal by the Revenue is dismissed.