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 : - “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? ii. Whether on the facts and circumstances of the case and in law, the 3 | P a g e ITA Nos. 6877 & 6878/Mum/2018 Shri Vimlesh J. Doshi Ld. CIT(A) erred in estimating the profit from Hawala purchase by disallowing only ₹1,92,780/- being 12.5% of the bogus purchase as even the basic onus of producing delivery challan, transport bills etc. were not fulfilled by the assessee?”

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: - In AY 2010-11 “Sl Name of party Amount No. 1. Victor Intertrade Private Limited 15,42,241/- In AY 2011-12 “Sl Name of party Amount No. 1. Victor Intertrade Private Limited 20,46,037 2. Om Corporation 6,91,435 Total 27,37,472 4 | P a g e & 6878/Mum/2018 Shri Vimlesh J. Doshi 4. 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: - “6. In view of the above discussed factual matric and precedents, I am of the view that estimation of 12.5% as profit embedded in impugned purchases shown from the alleged hawala party and adding the same to the total income returned, would meet the ends of justice. Therefore, I direct the AO to estimate profit @12.5% of the alleged bogus purchase, which works out to ₹1,92,780/- (@12.5% of ₹15,42,241/-) and restrict the addition to ₹1,92,780/-. The appellant gets a relief for the balance amount of ₹38,556/- (₹2,31,336-₹1,92,780/-).