SAMARTHMAL SANGHVI,MUMBAI vs. ITO 19(3)(2), MUMBAI

Brief facts of the case as emanating from records are: On the basis of information received from DGIT (Inv), Mumbai, the Assessing Officer reopened the assessment under section 147 of the Income Tax Act, 1961 (in short ‘the Act’)on the ground that the assessee has indulged in obtaining bogus purchase bills aggregating to Rs.72,36,259/- from various hawala operators. The Assessing Officer estimated GP @12.5% on the alleged bogus purchases and thus, made addition of Rs.9,04,532/-. Aggrieved against reopening of assessment and the addition made, the assessee filed appeal before CIT(A). The CIT(A) dismissed the appeal of assessee in toto. Hence, the present appeal by the assessee.

Shri Gautam Salecha appearing on behalf of the assessee submitted that the CIT(A) has erred in confirming addition to the extent of GP estimated at 12.5% on alleged bogus purchases. In fact the disallowance should have been restricted to GP estimated i.e. 12.5% minus GP already offered.

On the other hand, Shri Kumar Padmapani Bora, representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of the assessee. The ld. Departmental Representative submitted that the Assessing Officer and CIT(A) made fair estimation of 12.5% of GP on bogus purchases.

We have heard the submissions made by rival sides and have perused the orders of authorities below. The Assessing Officer in reassessment proceedings has held that the assessee has obtained bogus purchase bills to the extent of Rs.72,36,259/- from various parties. The Assessing Officer following the decision of Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Sheth, reported as 356 ITR 451 made disallowance of Rs.12.5% of such bogus purchase i.e. Rs.9,04,532/-. We find that that the addition made by authorities below is just and reasonable and hence, warrants no interference. The impugned order is upheld and the appeal of the assessee is dismissed.

In the result, appeal of the assessee is dismissed.