ITO 21(3)(5), MUMBAI vs. SHRI. VINIT PRAVIN SAKARIA, MUMBAI

Revenue by : Mr. R. Bhoopathil, DR Assessee by : Mr. Vinit Pravin Sakaria, the assessee Date of Hearing : 20/01/2020 Date of pronouncement : 29/01/2020 ORDER PER N.K. PRADHAN, A.M.

The appeal by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-48 [in short ‘CIT(A)], Mumbai and arises out of the assessment order passed by the Assessing Officer (AO) u/s 144 r.w.s. 147 of the Income Tax Act 1961, (the ‘Act’).

1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding only 12.5% addition of Rs. 17,83,232/- on the bogus purchases as against the AO’s stand of disallowing 100% of the bogus purchases, ignoring the fact that Shri Vinit Pravin Sakaria 2 the action of the Assessing Officer was only based on credible information received from the Maharashtra Sales Tax Department, the assessee, during the course of assessment proceedings, failed to prove the genuineness of the purchase transactions. 2. The appellant prays that the order of Ld. CIT(A) on the above grounds to be set aside and that of the Assessing Officer be restored.

3. Briefly stated, the facts of the case are that the assessee filed his return of income for the AY 2011-12 on 26.09.2011 declaring total income of Rs. 2,47,041/-. On receipt of information from the Sales Tax Department, Govt. of Maharashtra that the assessee has obtained bogus purchase bills from 5 entry providers amounting to Rs. 17,83,232/-, the Assessing Officer (AO) reopened the assessment by issuing notice u/s 148 on 11.02.2015. There was no compliance by the assessee to the said notice. During the course of reassessment proceedings, the AO issued notice u/s 133(6) to the concerned 5 parties for information. However, those notices were returned unserved by the postal authorities with the remark ‘left’. Therefore, the AO issued a final show cause notice u/s 142(1) r.w.s. 144 of the Act dated 03.03.2016 to produce documents in support of the said purchases. However the assessee failed to produce those documents. Therefore, the AO made an addition of Rs. 17,83,232/- to the income shown by the assessee.

4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that vide order dated 11.10.2018, the Ld. CIT(A) restricted the disallowance to 12.5% of such bogus purchases of Rs. 17,83,232/-.

Shri Vinit Pravin Sakaria 3

In the instant case, the assessee has obtained accommodation entries amounting to Rs. 17,83,232/- from 5 entry providers. The notices issued by the AO u/s 133(6) to the concerned entry providers were returned unserved by the postal authorities with the remarks ‘left’. The assessee also failed to file before the AO the documents to substantiate his purchases.

However, in such a situation only the profit embedded in such purchases be brought to tax. We find that the Ld. CIT(A) has rightly directed the AO to work out profit @ 12.5% of such bogus purchases of Rs. 17,83,232/- and bring it to tax. We confirm the order of the Ld. CIT(A).