ITO 33 (2)(4), MUMBAI vs. NILESH VINOD CHANDIWALA, 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)-45, 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 Shri Nilesh Vinod Chandiwala proceeding to dispose off this appeal on merits, after examining the documents available on record.

filed by the revenue read as under : i. Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A), Mumbai erred in restricting the addition to 3% of total bogus purchases instead of 12.5% made by the A.O. without appreciating the fact that the is one of the beneficiary of bogus hawala bills provider. ii. Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in ignoring the fact that investigations were carried out by the Assessing Officer and it was the finding of the independent investigations which proved that the purchases were bogus.

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 25.09.2009 declaring total income of Rs.4,26,230/-. On receipt of information from the Sales Tax Department, Government of Maharashtra that the assessee has obtained accommodation entries from 15 parties amounting to Rs.54,55,749/-, the Assessing Officer (AO) issued notice u/s 148 dated 14.03.2014 to the assessee. During the course of re-assessment proceedings, in order to verify the genuineness of purchases, the AO issued notice u/s 133(6) to the parties, which were returned un-served by the postal authorities with the remarks “not known”/ “closed”/ “left address”. Thereafter, the AO asked the assessee vide letter dated 25.02.2015 to produce the said parties before him for examination. In response to it, the assessee produced details of purchases, sales and bank statements. However, the AO was not convinced with the said submission of the assessee for the reason that the assessee failed to co-relate the purchases and sales. By taking into account the findings of the Sales Tax Shri Nilesh Vinod Chandiwala Department, Government of Maharashtra, the AO by following the judgment of the Hon’ble Gujarat High Court in CIT v. Simit P. Sheth 365 ITR 451 estimated the profit @ 12.5% of the disputed purchases of Rs.54,55,749/- which comes to Rs.6,81,968/-. Thus, an addition of Rs.6,81,968/- was made by him.

4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that vide order dated 19.06.2018, the Ld. CIT(A) restricted the disallowance made by the AO at 12.5% to 3% on the reason that only the saving on account of VAT and other incidental charges made by the assessee on the said bogus purchases can be brought to tax as additional profit. Thus the Ld. CIT(A) restricted the disallowance to 3%.

5. Before us, the Ld. Departmental Representative (DR) submits that there is no basis for restricting the disallowance to 3% as done by the Ld. CIT(A). It s stated by him that the notices issued u/s 133(6) by the AO were returned un- served by the postal authorities. Further, though the assessee was requested to produce the parties before the AO for examination, he failed to produce them. The Ld. DR further submits that no co-relation could be established between the purchases and sales of the assessee. Therefore, it is pleaded by him that the estimation @ 12.5% made by the AO be affirmed.