VIJAY J PITHADIA,MUMBAI vs. ACIT RANGE 17(3), MUMBAI

All these three appeals have common issues, therefore, they are clubbed together for hearing and for the sake of convenience and brevity, a common order is being passed. relate to reopening of assessment and addition made on account of bogus purchases by estimating profit on such bogus purchases.

Rival contentions have been heard and record perused. Facts in brief are that the assessee is engaged in jobwork of false ceiling, ducting, insulation etc. The A.O. got information from the Sales Tax Authority about some of the dealers under Mvat Act, 2002 indulging in the practice of providing accommodation entries in the form of issuing bogus sales bills. After recording due reasons, the A.O. reopened the assessment by issuance of notice U/s 148 of the Act. As per the reasons recorded, we found that the A.O. was justified in reopening the assessment since there was sufficient reason to believe that the income to the extent of bogus purchases has escaped assessment. Accordingly, we uphold the reassessment made U/s 147 of the Act.

With regard to merit of the addition, we found that during the course of reassessment proceedings, the A.O. has observed that the assessee could not file vital documents such as delivery challans, transport receipts, octroi receipt for payment of octroi duty, receipt of weighbridge for weighment of goods, excise gate pass etc. After making enquiry, the A.O. held that the assessee purchased goods from some other suppliers without bill and taken bill from Hawala dealers.

Before the ld. CIT(A), the assessee filed additional evidence under Rule 46A of the Income Tax Rules, 1962 (in short, the Rules) which indicates that the evidence regarding price comprising of purchase of various items made from alleged accommodation dealers vis a vis purchases made from other dealers during the year. However, the ld. CIT(A) has not admitted the additional evidence and without any reasoning, rejected the same. As per the ld AR, all these bills goes to the root of the issue for deciding the profit element embedded in such purchases. She also invited our attention to the gross profit declared by the assessee during the years under consideration which are ranging between 15 to 20%. She also submitted that following details were filed before the A.O.:

The ld. AR also relied on various judicial pronouncements in support of the contention that after filing the above details, no addition is warranted.

On the other hand, the ld DR has relied on the orders passed by the authorities below and contended that the assessee could not prove the genuineness of purchases and therefore, keeping in view the nature of assessee’s business being contractor, the A.O. has very reasonably estimated the profit after giving detailed finding in the order of respective years.

We have considered the rival contentions and carefully gone through the orders of the authorities below. We have also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the ld. AR during the course of hearing before us. From the record we found that the assessee is is engaged in jobwork of false ceiling, ducting, insulation etc. On getting information from the Sales Tax Department that the assessee has taken accommodation bill, the A.O. has reopened the assessment and which ranges from 20.46% to 23.22%.

From the record, we also found that before the lower authorities, the assessee has filed quantitative details for purchases made from these parties, list of purchase parties alongwith name, address and amount of purchases, copy of delivery challans for alleged bogus purchases, copy of bank statement evidencing the payment made towards the alleged bogus purchases. The assessee has also filed details of allocation of purchases made towards various job work contract in which the said alleged bogus purchases were utilized. We also found that the assessee has shown G.P. ranging from 15 to 20%, therefore, keeping in the view the various judicial pronouncements and facts and circumstances of the instant case, we modify the orders of the lower authorities and direct the A.O. to restrict the addition to the extent of 7% of the alleged bogus purchases. We direct accordingly.

In the result, all these three appeals are in allowed in part in terms indicated hereinabove.