ITO 19 (2)(3), MUMBAI vs. MAFARAM J. CHOUDHARY, MUMBAI

-16/Mum/2018 Mafaram J. Choudhary Assessment Years:2009-10 & 2012-13 Commissioner of Income-Tax (Appeals)-30, Mumbai, [in short referred to as ‘CIT(A)’], order dated 16/07/2018. The grounds raised for AY 2009-10 read as under: - 1. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in restricting the net addition on account of bogus purchases to the extent of 12.5% of the addition made by AO on account of bogus purchases? 2. "Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not considering the order of Hon’ble Supreme Court in the case of N.K.Protein Ltd. Dated 16-01-2017, which is on the similar issue of bogus purchases and when the apex court order was already the law of the land when the Ld.CIT(A) has pronounced its order on 09-07-2018?"

Before Ld. CIT(A), the assessee, inter-alia, submitted that the purchases were genuine since corresponding sales were accepted. It was also submitted that gross profit rate on disputed purchases was much higher than overall gross profit rate reflected by the assessee. The Ld. CIT(A), after considering factual matrix as well assessee’s submissions in the light of various judicial pronouncements, estimated the addition of 12.5% against these purchases. Reliance was placed on -16/Mum/2018 Mafaram J. Choudhary Assessment Years:2009-10 & 2012-13 the decision of Hon’ble Gujarat High Court in CIT V/s Simit P.Sheth (356 ITR 451) while making such addition. Aggrieved, the revenue is under further appeal before us.

Upon due consideration, we are of the opinion that there could be no sale without actual purchase of material particularly when the assessee was into trading activities. The sales turnover has not been disputed / disturbed by the revenue. The assessee was in possession of primary purchase documents and the payments to the suppliers were through banking channels. However, at the same time, the assessee failed to produce any of the suppliers to confirm the transactions. Notices issued u/s 133(6) did not elicit satisfactory response and the assessee failed to discharge the primary onus of substantiating the purchase transactions. The stated factual matrix, in our considered opinion, would make it a fit case to make estimated additions to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey / unorganized market and undue benefit of VAT against such bogus purchases, which lower authorities have rightly done so. Therefore, finding the estimation of 12.5% to be quite fair and reasonable, we decline to interfere in the impugned order. The appeal stands dismissed.

Facts are pari-materia the same in this year. The assessee was similarly saddled with additions of non-genuine purchases aggregating to Rs.179.74 Lacs. The Ld. CIT(A), following its decision in AY 2009-10, estimated the additions @12.5%. The impugned order is common order -16/Mum/2018 Mafaram J. Choudhary Assessment Years:2009-10 & 2012-13 for both the years. Aggrieved, the revenue is under further appeal before us.

Since facts are pari-materia the same, our decision for AY 2009-10 shall mutatis-mutandis apply to this year also. Resultantly, the grounds raised