PRABHURAM V. PRAJAPATI,MUMBAI vs. ITO - 19(2)(5), MUMBAI

O R D E R Per Pawan Singh, JM : 1. These two appeals filed by the revenue are directed against the common order of the learned CIT(A)-30, Mumbai dated 31-05-2018 for assessment year(AY) 2009-10 & 2011-12. The assessee has raised almost common grounds of appeal for both the years. Therefore, both the appeals were clubbed, heard together and are disposed of by this common order. The appeal for AY 2011-12 is considered as the lead case. The assessee has raised the following grounds of appeal:- “On the facts and circumstances of the case and in law, the learned CIT (A) erred in ascertaining 12.5% gross profit of Rs. 12,34,832 on alleged purchase of 98,78,661/- to the total income under the Income Tax Act 1961, without considering the facts of the case.”

2 ITA 5956 & 5957/Mum/2018 Parbhuram V Prajapati 2. The brief facts of the case are that the assessee, an individual engaged in the business of trading in metals, filed its return of income for the assessment year 2011-12 on 13-09-2011 declaring total income at Rs.4,77,300/-. The return was processed u/s 143(1) of the Income-tax 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.98,78,661/- 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 16-09-2014 was issued to the assessee. The reasons recorded for reopening the assessment was also furnished to the assessee. The Assessing Officer thereafter issued a notices u/s 143(2) and 142(1). 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:

3 ITA 5956 & 5957/Mum/2018 Parbhuram V Prajapati Name of the parties Bill amount (Rs.) 1 Rahul Steels 26,20,893 2 Monu Metal 8,91,293 3 Mona Metals / Metalex Metal 7,13,467 Corporation 4 Parmar Steel (India) 56,44,512 5 Rebhar Enterprises 8,496 Total 98,78,661/-

4 ITA 5956 & 5957/Mum/2018 Parbhuram V Prajapati 5. None appeared on behalf of the assessee before us, despite service of notice of hearing on the assessee. Therefore, we are left with no alternative but to hear the learned departmental representative (Ld. DR) for the revenue and dispose of the appeal on the basis of material available on record.

5 ITA 5956 & 5957/Mum/2018 Parbhuram V Prajapati Tax Act only real income can be taxed by the Revenue. We may further conclude that even if the transaction is not verifiable, the only taxable is the taxable income component and not the entire transaction. And after considering the facts of the case and the rival contentions of the parties we are of the opinion that in order to fulfil the gap of revenue leakage the disallowance of reasonable percentage of such purchases would meet the end of justice.