ITO 19 (3)(1), MUMBAI vs. RADIUM STEEL, MUMBAI

The present appeal has been preferred by the Revenue against the order dated 10.08.2018 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.

The only issue raised by the Revenue is against the order of ld. CIT(A) restricting the addition on account of bogus purchases to 12.5% as against 25% made by the AO.

The facts in brief are that the assessee filed his return of income on 23.09.2009 declaring total income of Rs.1,41,053/- which was processed u/s 143(1) of the Act. The assessee is engaged in the business of ferrous and non-ferrous. The AO reopened the case after receiving information from Sales Tax Department, Govt. of Maharashtra that the assessee is beneficiary of hawala purchase entries. The case of the assessee was reopened u/s 147 by issuing a notice u/s 148 dated 07.02.2014. During the assessment proceedings, the assessee was called upon to file bills, vouchers with other documents to prove the genuineness of these purchases. The assessee filed copies of bills of the suppliers, bank statements, sales tax receipts and VAT challans beside ledger accounts of hawala dealers. The AO rejected the contentions of the assessee on the ground that the genuineness of the purchases was not proved as these purchases remained unverifiable and finally after rejecting the books of accounts under section 145(3) ,applied the rate of 25% thereby making an addition of Rs.24,33,014/- to the total income of the assessee by framing an assessment u/s 143(3) r.w.s 147 of the Act vide order dated 20.03.2015.

In the appellate proceedings, the ld. CIT(A) partly allowed the appeal of the assessee by following the decision of CIT vs. Simit P. Sheth reported in 356 ITR 451 by noting that the assessee is engaged in ferrous and non-ferrous trading and justified the estimation of income of 12.5%.

After hearing both the parties and perusing the material on record, we observe that in this case the undisputed facts are that the assessee was beneficiary of hawala purchases entries from several parties as reported by the Sales Tax Department, Govt. of Maharashtra. The AO made addition of bogus purchase equal to 25% which was reduced to 12.5% by CIT(A) after following the decision of Simit P. Sheth(supra). We note that the ld. CIT(A) passed a reasoned and speaking order especially the nature of business carried on by the assessee. Accordingly the same is upheld by dismissing the appeal of the revenue.