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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
आदेश / O R D E R राजेश कुमार, लेखा सदस्य / PER RAJESH KUMAR, AM:
This appeal by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-40, Mumbai in Appeal No. CIT(A)-40/IT-525/15-16 dated 03.12.2018. The Assessment was framed by the Income Tax Officer, Ward-29(3)(5), Mumbai (in short ITO/ AO) for AY 2010-11 vide dated 29.01.2016, under section 143(3) read with section 147 of the Income-tax Act, 1961 (hereinafter ‘the Act’).
2 | P a g e Shri Samir Shantilal Gosar 2. At the time of hearing neither the assessee nor his authorized representative was present to attend the hearing despite service of notice through RPAD. We are, therefore, deciding the appeal on merits after hearing the ld. DR.
The only issue in on merits, in this appeal of Revenue is against the order of CIT(A) restricting the action of the AO in estimating the t rate at 6% of the bogus purchases as against 25% applied by the AO.
Briefly stated facts are that the assessee engaged in the business of Printing & Publishing of product labels and advertisement hoardings. The AO received information from DGIT (Investigation), who in turn received information from Sales Tax Department, Mumbai that the assessee has made purchases from hawala parties, as listed in hawala dealers by the Maharashtra Sales Tax Department who are providing bogus bills of purchase amounting to Rs. 11,32,441/- as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: -
“Sl Name of party Amount No. 1. National Trading Co. 1,00,013 2. Matoshree Traders 3,91,673 3 Rajeshwari Enterprise 33,075 4. Swayam International 6,07,680 5. The AO issued noticed under section 133(6) to the parties which returned back as unserved and assessee failed to produce these parties. According to information received the name of this party was appearing in the list of hawala entry operators as 3 | P a g e Shri Samir Shantilal Gosar supplied by sales Tax Department of Maharashtra. The hawala traders admitting before the sales tax authorities in their deposition that they were providing only accommodation purchase bills on commission basis without being actual purchase/ sale of goods. The AO during the course of scrutiny assessment proceedings required the assessee to file the details of purchase. The assessee filed copies of purchase bills from the above said parties, copies of ledger extract and copies of bank statements to prove the payments by cheque. The AO required the assessee to produce these parties for verification but assessee expressed his inability to do so. According to the AO, the assessee failed to establish the genuineness of the purchase and accordingly, he made addition of profit rate @ 25.12% of unproved purchase at ₹2,84,469/- to the return income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who restricted the disallowance at 6% of the bogus purchases by observing in para 4.15 by observing as under: -
“4.15 However, keeping in view of the various judicial pronouncements as mentioned above, a reasonable estimated suppressed profit may be taken at 6% instead of 25.12% adopted by the AO. Therefore, AO is directed to work out gross profit margin at 6% as reasonable addition on the total bogus purchases shown at ₹11,32,441/- and add to the income returned. The AO may accordingly work out the addition on the above lines and accordingly the appeal filed by the appellant is partly allowed.”