ITO 27 (1)(5), MUMBAI vs. JIGNESH R. KAPASI, MUMBAI

26, Mumbai [hereinafter referred as ld. CIT(A)] dated 16.08.2018 for Assessment Year 2009-10. The assessee has raised the following grounds of appeal: 1) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 1,84,367/- on account of bogus purchases without appreciating that the onus was on the assessee to establish the genuineness of such purchases by providing documentary evidence before the Assessing Officer and the assessee, failed to discharge its onus? 2) The appellant prays that the order of CIT(A) on the above grounds be reversed and that of the Assessing Officer restored.

Brief facts of the case are that the assessee is a proprietor of M/s Fear

The Assessing Officer in order to verify the transaction issued notice under section 133(6) of the Act to all the parties. The notice was returned back unserved by the Postal Department with the remark ‘Not known or Left’, except to Dharmi Enterprises. The proprietor of Dharmi Enterprises filed his affidavit confirming the transaction. The assessing officer accepted the confirmation filed by Dharmi Enterprises. The assessee was confronted with the facts about the return of notices. The assessee was asked to produce the parties for verification. The assessing officer recorded that the assessee failed to produce the parties. The onus to prove the genuineness of purchases was on assessee, the assessee failed to discharge his onus. The 3 Mum 2018-Shri Jignesh R. Kapasi assessee was asked to substantiate the purchases and to furnish the delivery challans, transport bills etc. The assessing officer recorded that the assessee failed to bring enough evidence to prove the existence of the parties. The assessee merely filed copies of the bills and payments through cheques. No evidence regarding the transportation of gods was filed. The Assessing Officer after considering the material before him and report of investigation wing and sales tax department concluded and by following the decision of Gujarat High Court in Simith P Sheth 356 ITR 451(Guj) took his view that it would be just fair and proper to make addition of profit element embedded in such bogus purchase. The assessing officer accepted the confirmation filed by Dharmi Enterprises and allowed the purchases of Rs. 39,37,066/-. The assessing officer disallowed 12.5% of the aggregate of total purchases of remaining eight parties non-genuine/alleged hawala purchases of Rs. 28,33,076/-. The Assessing officer worked out the disallowance of Rs. 354,135/-, in the assessment order passed under section 143(3) r.w.s 147 dated 27.03.2015.

On appeal before the ld. CIT(A), the addition on account of purchases shown from Girnar Sales Corporation and Jainam Enterprises was also deleted. The ld CIT(A) deleted the additions/ disallowance by considering the facts the assessing officer in subsequent years i.e. 2010-11 & 2011-12 allowed purchases from both the parties. Aggrieved by the order of ld. CIT(A), the revenue has filed the present appeal before us. 4 ITA No. 6430 Mum 2018-Shri Jignesh R. Kapasi

We have heard the submission of ld. Departmental Representative (DR) for the revenue and the learned authorised representative (ld AR) for the assessee and perused the material available on record. The ld. Departmental Representative (DR) for the revenue supported the order of lower authorities. The ld. DR further submits that Investigation Wing of Income- tax Department has made full-fledged investigation in respect of hawala traders. The hawala traders were/are engaged in providing bogus bill without actual delivery of goods. The assessee has shown bogus purchases only to inflate the profit. The ld. DR for the revenue submits that the Assessing Officer has given sufficient relief. The Assessing Officer has reasonably estimated the disallowances. The assessee is not entitled for any further relief. On re-opening the ld. DR submits that there was sufficient tangible material/information in the form of information from DGIT (Investigation) that Sale Tax Department, Government of Maharashtra has unearthed the scheme about the hawala entry provider, who were engaged in providing bogus bills, therefore, the Assessing Officer has sufficient reason for making belief that the income of the assessee has escaped assessment.

On the other hand the ld AR for the assessee supported the order of the ld CIT(A). the ld AR for the assessee submits that the assessing officer himself allowed the similar purchases from Girnar Sales Corporation and Jainam Enterprises in subsequent years i.e. 2010-11 & 2011-12 allowed 5 Mum 2018-Shri Jignesh R. Kapasi purchases from both the parties in the assessment order passed under section 143/147 dated 29.01.2019 and 20.10.2016 respectively. 7. We have considered the submissions of ld. DR for the revenue and perused the record. Ground No.1 relates to disallowance of 12.5% of the bogus purchases from Girnar Sales Corporation and Jainam Enterprises. The Assessing Officer made addition to the extent of profit element embedded in such transactions and restricted the disallowance to the extent of 12.5% of the alleged non-genuine purchases of eight parties by following the decision of Hon’ble Gujarat High Court in CIT vs. Simith P. Seth [356 ITR 451 (Guj.)]. Before ld CIT(A) the assessee stated that the proprietor of Girnar Sales Corporation and Jainam Enterprises Sh. Rajesh Doshi expired on 04/05/2012. Rajesh Doshi was propitiator of Girnar Sales Corporation and Karta of Rajesh Doshi HUF, being proprietor Jainam Enterprises. The assessee filed copy of death certificate of Rajesh Doshi. It was further contented that similar purchases was allowed by assessing officer in AY 2010-11 & 2011-12 allowed purchases from both the parties in the assessment order passed under section 143/147 dated 29.01.2019 and 20.10.2016. 8. The ld CIT(A) after considering the submissions of the assessee concluded that the assessing officer allowed purchases from both the parties in the assessment order passed under section 143/147 dated 29.01.2019 and 20.10.2016. Moreover the requirement of producing the proprietor of 6 Mum 2018-Shri Jignesh R. Kapasi Girnar Sales Corporation and Jainam Enterprises is impossible, accordingly ld CIT(A) directed the assessing officer to allow the purchases from both the parties. In our view that ld CIT(A) has taken a correct view and directed the Assessing officer to allow the purchases. We are also of the view that the assessing officer must follow the consistency on same set of facts.