ITO 28 (1)(1), MUMBAI vs. SHRI. AMEER MOHD. ISMALL BASHA, MUMBAI

आदेश / O R D E R PER: R.C. SHARMA, A.M. These are the appeals filed by the revenue against the separate orders of the ld. CIT(A)-26, Mumbai dated 21/12/2018 for the A.Y. 2010-11 & 2011-12 in the matter of order passed U/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short, the Act).

“6. I have considered the facts of the case and the appellant's submissions. 6.1. Ground of the appeal is against addition of Rs. 7,54,605/- being 28.29% of non-genuine purchases of Rs 26,21,0697-. As per the investigations carried out by the Sales Tax Authorities, the aforementioned party was found to be involved in giving accommodation entries only without actually supplying the goods. The logical inference is that the purchases made by the appellant would also be in the nature of accommodation entries only. To verify the same, the AO had made enquiries by issuing notices u/s 133(6) which were returned unserved by the postal authorities. This party was found to be nonexistent at the address given by the appellant. The appellant also failed to provide the latest address of the party. During the scrutiny assessment the appellant furnished details of purchases and corresponding sales. However, the appellant could not produce the party before the AO in spite of opportunity being given. The appellant also failed to produce delivery challans or transportation details. The onus of proving the genuineness of such purchases is on the appellant which the appellant had not been able to discharge 'fully. When the hawala party had admitted on oath that it had given accommodation entries only without actually supplying the goods, the genuineness of purchases made from these parties will have to be considered taking this into consideration while examining the documentation

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3 & 1326/Mum/2019 ITO Vs Shri Ameer Mohd. Ismail Basha submitted by the appellant in support of its claim. The documentary evidences such as purchase bills, payments by cheques, etc. would all have been orchestrated to present a facade of genuineness and does not necessarily mean that the purchases from these parties are genuine. The Courts have held that payment by cheque by itself is not sacrosanct so as to prove genuineness of purchases when the surrounding circumstances are suspected. However, the assessee has shown onward sales which has not been doubted by the Assessing Officer. Since there can be no sales without corresponding purchases, the only logical explanation is that the appellant would have made purchases from undisclosed parties in the grey market at lower rates and purchases , were shown as being made from the impugned parties to suppress its profits. In such a situation, the various Courts including the Hon'ble Gujarat High Court in the case of CIT vs Simit P. Sheth, 356 ITR 451 have held that not the entire purchases but only the profit element embedded in these purchases was to be disallowed and accordingly held that 12.5% of the purchases will be reasonable as profit on margin against the bogus purchases. In view of this decision of Hon'ble Gujarat High Court (supra), the addition made by the AO is restricted to 12.5% of the total alleged bogus purchases amounting to Rs. 26,21,069/- which should sufficiently cover the profit element embedded in the impugned purchases. The appellant's grounds of appeal are “Partly Allowed.”

5. We found from the record that the ld. CIT(A) after considering various judicial pronouncements and applying the same to the facts of the case, the ld. CIT(A) has restricted the addition to the extent of 12.5%. The detailed finding so recorded by the ld. CIT(A) has not been controverted by the ld DR by bringing any positive material on record.

4 & 1326/Mum/2019 ITO Vs Shri Ameer Mohd. Ismail Basha Accordingly, we do not find any reason to interfere with the order of the ld. CIT(A) for upholding the addition to the extent of 12.5%. Hence, we uphold the order of the ld. CIT(A).