ITO 21 (3)(5), MUMBAI vs. VINIT PRAVIN SAKARIA, MUMBAI

O R D E R PER PAWAN SINGH, JM : 1. This appeal filed by the revenue is directed against the order of CIT(A)- 48, Mumbai dated 30-07-2018 for the Assessment Year 2010-11. The revenue has raised the following grounds of appeal:-

1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding only 12.5% addition of Rs.15,25,661/- on the bogus purchases as against the AOs stand of disallowing 100% of the bogus purchases, ignoring the fact that the action of the Assessing Officer was only based on credible information received from the Maharashtra Sales Tax Department, the assessee, during the course of assessment proceedings, failed to prove the genuineness of the purchase transactions.

2. The appellant prays that the order of Ld. CIT(A) on the above grounds to be set aside and that of the Assessing Officer be restored.”

3. The brief facts of the case are that the assessee is an individual and is Trader engaged in the business dealing in Bearings, Hardware, Electric items etc., filed his return of income on 10-10-2010 declaring income of 2 ITA 5934 Mum 2018-Shri Vinit Pravin Sakaria Rs.2,31,728/-. The return was processed u/s 143(1) of the I.T. Act, 1961. The assessment was re-opened under section 147 on the basis of information received from Sale Tax Department, Government of Maharashtra that certain hawala operators are indulging in providing accommodation bills without actual delivery of goods. The Sale Tax Department, Government of Maharashtra referred the list of such hawala dealers and the beneficiary to the DGIT (Investigation), Mumbai. The name of assessee appeared in the list of beneficiaries. The assessee allegedly made the purchases of Rs.15,25,661/- from such hawala dealers. On the basis of information, the Assessing Officer made a belief that the income of the assessee escaped assessment, therefore, re-opened the assessment under section 147. Notice under section 148 dated 11-02-2015 was issued to the assessee. No compliance was made by assessee nor any return in response of notice under section 148 was filed. The Assessing Officer thereafter issued a notices u/s 143(2) and 142(1) along with a questionnaire. But here also there was no compliance from the assessee. The Assessing Officer levied the penalty under section 271(1)(b) on 07.12.2015. The assessee contested the proceeding through his counsel on 08.01.2012. On further show-cause notice, the assessee filed acknowledgement of return of income filed in compliance of notice under section 148. The Assessing Officer noted

3 ITA 5934 Mum 2018-Shri Vinit Pravin Sakaria that despite repeated show-cause notice and notices under section 142(1) and 143(2), the assessee neither made compliance nor furnished any documentary evidences to substantiate the purchases. The Assessing Officer made assessment under section 144 of the Act. During the assessment, the Assessing Officer noted that the assessee has shown purchases from the following parties, which was declared as hawala dealers by the Sale Tax Department, Government of Maharashtra:

Name of the parties Bill amount (Rs.) 1 Laxmi Trading Co. 25,480 2 Shreeji Enterprises 1,81,511 3 Nimesh Trading Co. 2,45,626 4 H.R. Corporation 2,77,219 5 A.G. Corporation 7,95,825 Total 15,25,661

4 ITA 5934 Mum 2018-Shri Vinit Pravin Sakaria addition of Rs. 15,25,661/-, while passing the assessment order on 18.03.2016 under section 144 r.w.s. 147. 5. On appeal before the ld. CIT(A), the addition was restricted to the extent of 12.5% of such purchases being the profit on such bogus purchases.

Aggrieved by the order of ld. CIT(A), the revenue has filed the present appeal before us.

5 ITA 5934 Mum 2018-Shri Vinit Pravin Sakaria under section 131 was issued by Assessing Officer to the alleged hawala dealers. The finding of Assessing Officer is solely based on the report of Sale Tax Department and DGIT (Investigation), Mumbai. Before the ld. CIT(A), the assessee explained that he has submitted bills of purchase and proof of payment through banking channels. The assessee is not maintaining Stock Register. There is no Warehouse/Store/Godown. It was further explained the assessee forwarded the goods/sale directly from the seller to ultimate buyer. The goods purchased by assessee not came in possession of assessee. The ld. CIT(A) after considering the submission of assessee and the material placed before her, restricted the addition to the extent of 12.5% of alleged bogus purchase by considering the fact that the Tribunal in a number of cases held that only profit on bogus purchases of the goods is to be taxed. We are also of the view that even if the purchases are not fully verifiable, the revenue is entitled to tax the income component only and not the entire transaction.

The Ld. DR failed to convince us as to why the disallowance restricted to 12.5% of the alleged bogus purchases is not justified. Considering the facts and circumstances of the case and the business activity and the facts explained before the ld. CIT(A) as recorded in para-5.1.1. Thus, we do not find any merit in the grounds of appeal raised by the revenue.

No contrary fact or law is brought to our notice to take a different view.

6 ITA 5934 Mum 2018-Shri Vinit Pravin Sakaria

Order pronounced in the open court on 04-12-2019.