ITO 27 (2)(5), MUMBAI vs. PRITESH A. SHAH, MUMBAI

ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the Revenue. The relevant assessment year is 2009-10. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-25, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) r.w.s. 147 of the Income Tax Act 1961, (the ‘Act’). Though the case was fixed for hearing on 21.11.2019, neither the assessee nor his authorized representative appeared before the Bench on the above date. As there is non-compliance on the part of the assessee, we are proceeding to dispose off this appeal on merits, after examining the documents available on record.

1. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs.8,58,946/- on account of bogus purchases, without appreciating the fact that the assessee had failed to produce bills, vouchers and others documentary evidences in support of his claim and without considering the latest Apex court decision in the case of NK Protein Ltd. wherein it is held that once it is proved that the purchases are bogus then addition should be made on entire purchases and not on profit element embedded in such purchases.

2. On the facts and circumstances of the case, the Ld. CIT(A) erred in estimating the profit from Hawala purchases by disallowing only Rs.1,22,707/-, being 12.5% of the bogus purchases as even the basic onus of producing transport bills, delivery challans, transport bills etc. were not fulfilled by the assessee. 3. Briefly stated, the facts of the case are that the assessee filed his return of income for the assessment year (AY) 2009-10 on 31.07.2019 declaring total income of Rs.7,44,900/-. On receipt of information from the Sales Tax Department, Government of Maharashtra that the assessee had obtained accommodation entries through hawala operators, the Assessing Officer (AO) re-opened the assessment by issuing notice u/s 148 dated 30.03.2014. In response to it, the assessee filed a reply stating that the return filed earlier on 31.07.2009 may be treated as having been filed in response to notice u/s 148 of the Act.

Disputed amount of purchases herein is Rs.9,81,653/-. During the course of re-assessment proceedings, the AO issued notice u/s 133(6) to the concerned four parties for the purpose of ascertaining the genuineness of purchases. However, the notices issued by him were returned un-served by the postal authorities with a remark “left”. Thereafter, the AO deputed the Pritesh A Shah Inspector of Income Tax to make inquiry. The AO has mentioned that the inquiry done by the Inspector could not locate the whereabouts of the parties. This fact was brought by the AO to the notice of the assessee during the course of assessment proceedings. Simultaneously, the AO asked the assessee to produce the said parties before him so that the transactions could be verified. In response to it, the assessee filed a written submission stating that the purchases are genuine and payments have been made through account payee cheques. Further it was stated before the AO that the assessee had paid the VAT liability in order to avoid litigation. However, the AO was not convinced with the above explanation of the assessee for the reason that the assessee failed to produce any of the suppliers, brokers or transporters before him, inspite of opportunity being granted. On the basis of the above facts, the AO made an addition of the entire amount of purchases i.e. Rs.9,81,653/- to the total income shown by the assessee.