ITO -WD- 3(3), KALYAN vs. KAPIL D. MEHTA, DOMBIVALI

आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member): - 1.1 The assessee is under appeal before us for AYs 2009-10 & 2010-11 whereas the revenue is under appeal before us for AY 2010-11. The impugned order has been passed by Ld. Commissioner of Income-Tax (Appeals)-1, Thane, [in short referred to as CIT(A)], Appeal No.126 & 124/2015-16 dated 26/06/2018 which is common order for both the years. 1.2 The assessee, in AY 2009-10, has raised following grounds of appeal:-

2. The Hon'ble CIT (A) erred in confirming addition of part unproved Purchases of Rs.6.70,876/- without considering the facts and contrary to the provisions of the Income Tax Act, 1961.

3. The Hon'ble CIT(A) has erred in estimating GP based on earlier years without considering the facts and contrary to the provisions of the Income Tax Act, 1961.

We have heard and considered the arguments advanced by both the representatives. 2.1 Facts on record would reveal that the assessee being resident individual stated to be engaged in dealing in weaving accessories & industrial Hardware under proprietorship concern namely M/s Shree Ram Sales Corporation, was assessed for impugned AY u/s. 143(3) r.w.s. 147 on 09/05/2015 wherein the income of the assessee was determined at Rs.12.04 Lacs, after sole addition of alleged bogus purchases for Rs.6.70

Shri Kapil D. Mehta Assessment Years 2009-10 & 2010-11 Lacs as against returned income of Rs.5.33 Lacs filed by the assessee on 29/09/2009 which was processed u/s.143(1). 2.2 Pursuant to receipt of certain information from investigation wing / Sales tax Department, Govt. of Maharashtra, it transpired that the assessee stood beneficiary of alleged bogus purchases to the tune of Rs.6.70 Lacs from 5 entities, the details of which have already been extracted in the quantum assessment order. Accordingly, as per due process of law, re- assessment proceedings were initiated against the assessee u/s 147 by issuance of notice u/s 148 on 10/05/2013 followed by statutory notices u/s 143(2) & 142(1) wherein the assessee was directed to substantiate the purchase transactions. 2.3 Although, the assessee defended the purchases, however, notice issued u/s 133(6) to confirm the transactions, remained un-responded to and the assessee failed to produce any of the supplier to confirm the transactions. Therefore, the books were rejected u/s 145(3) and the stated purchases were added to the income of the assessee. 2.4 The Ld. CIT(A), after considering assessee’s submissions, various judicial pronouncements, material on record and after appreciating the Gross Profit / Net Profit Trends for various years, applied Gross Profit Rate of 11.55% to the total sales reflected by the assessee during the year under consideration. The said rate was nothing but Gross Profit Rate of AY 2007- 08. The same resulted into confirmation of full addition in the hands of the assessee. Aggrieved, the assessee is under appeal before us.

Shri Kapil D. Mehta Assessment Years 2009-10 & 2010-11 3. We are of the considered opinion there could be no sale without actual purchase of material keeping in view the assessee’s nature of business. The assessee was in possession of primary purchase documents and the payments to the supplier was through banking channels. However, at the same time, the assessee miserably failed to substantiate the purchases during assessment proceedings. The assessee failed to produce any of the suppliers to confirm the transactions and also failed to prove the delivery of material. Under such circumstances, the additions which could be sustained, was to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases. However, estimating the addition by applying Gross Profit rate of earlier year to the current year on total sales, in our considered opinion, was not correct approach. For ease of computation, we estimate the additions @8% of alleged bogus purchases of Rs.6,70,876/- which comes to Rs.53,670/-. The balance addition stands deleted. The learned AO is directed to recompute the income in terms of our order. The appeal stands partly allowed.

Shri Kapil D. Mehta Assessment Years 2009-10 & 2010-11 Hence, our observation, conclusion as well as adjudication as for AY 2009- 10 shall mutatis mutandis apply to this year also. The impugned additions stand restricted to 8% of alleged bogus purchases of Rs.6,13,909/- which comes to Rs.49,113/-. Resultantly, the assessee’s appeal stands partly allowed whereas the revenue’s appeal stand dismissed. 5. stand partly allowed whereas stand dismissed. Order pronounced in the open court on 03rd October, 2019.

Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांकDated : 03/10/2019 Sr.PS:-Jaisy Varghese आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकरआयु�(अपील) / The CIT(A) 3. आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड�फाईल / Guard File 6.