ITO 33(1)(4), MUMBAI vs. DEEPAK R. BANSODE, MUMBAI

The present appeal has been preferred by the Revenue against the order dated 10.09.2018 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2011-12.

The only issue raised by the Revenue in the present appeal is against the order of ld. CIT(A) restricting the addition on account of bogus purchases to the extent of Rs.12.05% of the total bogus purchases as against 25% added by the AO.

The facts of the case are that the assessee filed return of income on 22.08.2011 declaring total income of Rs.10,29,510/-. Thereafter, the AO during the course of assessment proceedings received information from DGIT(Investigation), Mumbai that the assessee has made some purchases from hawla/bogus party M/s Matoshree Traders during the financial year 2010-11 amounting to Rs.7,05,536/- which was declared a hawala dealer by the Sales Tax Department, Mumbai, Govt. of Maharashtra. The case was reopened u/s 147 of the Act by issuing notice u/s 148 dated 02.01.16. During the course of hearing, the assessee was called upon to prove the genuineness of the purchases through show-cause notice dated 24.10.2016 which was replied by the assessee by filing the copies of bills, vouchers, payment details etc. The AO however was not finding the contentions of the assessee as tenable and came to the conclusion that the assessee has failed to prove the genuineness of the purchases and thus following the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Sheth reported in 356 ITR 451 and in the case of M/s Bholanath Poly Fab. P. Ltd. reported in 355 ITR 290, the AO applied the GP rate @25% on the said bogus purchases to bring the profit element to tax by framing assessment u/s 143(3) r.w.s. 147 dated 29.11.2016.

In the appellate proceedings, the ld. CIT(A) restricted the disallowance to 12.50% which comes to Rs.88,317/- after considering the submissions and contentions of the assessee and thus partly allowed the appeal of the assessee.

After hearing the ld. DR and perusing the material on record, we observe that in this case the undisputed facts are that the assessee was beneficiary of hawala purchase entries to the tune of Rs.7,06,536/-. Though the assessee has tried to substantiate and prove the genuineness of the purchases but the AO not being convinced sought to assess the profit element on the said bogus purchases on the ground that these purchases were made from hawala dealer who are engaged in issuing bogus purchase bills only without doing any actual business and thus applied a rate of 25% on the bogus purchases thereby making an addition of Rs.1,76,384/- by following the decision of CIT vs. Simit P. Sheth and M/s Bholanath Poly Fab. P. Ltd. (supra) . Pertinent to note that the corresponding sale were not doubted. The ld. CIT(A) reduced the said addition to 88,317/- by applying 12.5% bogus purchases after taking into account the contentions of the assessee. We do not find any reason to interfere the appellate order as ld CIT(A) has only applied reasonable rate. We are, therefore, inclined to uphold the order of the ld. CIT(A) on this issue which is pursuant to the decision of the various High Courts and Tribunals by dismissing the appeal of the Revenue.

In the result, the appeal of the Revenue is dismissed.