ITO 27 (3)(5), MUMBAI vs. VIMLESH J. DOSHI, MUMBAI

The only issue in these appeals of Revenue is against the order of CIT(A) restricting the addition made by applying the profit rate at the rate of 12.5% of the bogus purchases. The facts and circumstances are exactly identical in both the assessment years i.e. AYs 2010-11 and 2011-12 except quantum, hence, we will take the facts from AY 2010-11 and decide the issue. For this assessee has raised following grounds in AY 2010-11 in ITA No. 6877/Mum/2018: - “i. Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to restrict the addition to 12.5% of ₹15,42,241/- as against 15% addition of ₹15,42,241/- made by the Assessing Officer on account of bogus purchases, without appreciating the fact that the assessee has failed to discharge the onus to establish the genuineness of the transactions and also failed to furnish corroborative evidence in support of the claim?

Briefly stated facts are that the assessee engaged in the business of Plywood. The AO received information from DGIT (Investigation), who in turn received information from Sales Tax Department, Mumbai that the assessee has made purchases from hawala parties, as listed in hawala dealers by the Maharashtra Sales Tax Department who are providing bogus bills of purchase amounting to ₹15,42,241/- for AY 2010-11 and ₹27,37,472 for AY 2011-12 as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: -

During the course of assessment proceedings and during appellate proceedings, the assessee submitted all the documentary evidences such as inward register, stock register, payment received against such sales, receipt of material purchases, account payee cheque. According to the AO, the assessee failed to establish the genuineness of the purchase and accordingly, he made addition of unproved purchase i.e. 15% of ₹15,42,241/- for AY 2010-11 and Rs 17.5% of ₹27,37,472 for AY 2011-12 to the return income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who restricted the disallowance at 12.5% of the bogus purchases by observing in para 6 as under: -

I have considered the issue and gone through the facts and circumstances of the case. I noted the facts from the assessment order and also from CIT(A)’s that the assessee submitted the ledger accounts of the above parties and bank statements extracts evidencing the payments through bank cheque. I noted that facts of this case are similar to the case of Hon'ble High Court of Gujarat in the case of Simit P Seth V CIT (2013) 356 ITR 451(Guj) wherein it had on occasion to deliver its judgment by confirming the decision of the ITAT which has estimated the disallowance at 12.5% of the disputed bogus purchases to meet the end of Justice. Even now before me also revenue could not dislodge the factual aspects noted by CIT(A). I find that the CIT(A) has rightly applied the profit rate at the rate of 12.5% and I confirm the same. This issue of Revenue’s appeal is dismissed.

As the issue is same in AY 2011-12 also, hence taking a consistent view, I confirm the order of CIT(A) in this year also.

In the result, both the appeals of the Revenue are dismissed. Order pronounced in the open court on 17.12.2019. (महावीर स िंह /MAHAVIR SINGH) (न्याययक दस्य/ JUDICIAL MEMBER) मुिंबई, ददिािंक/ Mumbai, Dated: 17.12.2019 स दीप सरकार, व.यनजी सधिव / Sudip Sarkar, Sr.PS