ITO 28(1)(1), MUMBAI vs. ANIL NARAYAN LOKRE (PROP. ANIL TRADING CO.), MUMBAI

This appeal by revenue is directed against the order of ld. CIT(A)-26, Mumbai dated 28.06.2018 for Assessment Year 2010-11 The revenue has raised the following grounds of appeal:

Brief facts of the case are that the assessee is proprietor of M/s Anil Trading Company engaged in the business of manufacturing of transformer, brushing parties for electricity power supply , filed its return of income for Assessment Year 2010-11 on 09.10.2010 declaring total income of Rs. 3,95,937/-. The return of income was processed under section 143(1). 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 beneficiary. 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. The notice under section 148 Mum 2018-Anil Narayan Lokre dated 25.03.2015 was served upon the assessee. The assessee in response to the notice under section 148 filed its reply dated 01.06.2015 and requested for supply of reasons recorded. The Assessing Officer after serving notice under section 143(2) proceeded for re-assessment. During the assessment, the Assessing Officer noted that the assessee has shown purchases of Rs. 15,30,070/- from the following parties, which were declared as hawala dealers by the Sale Tax Department, Government of Maharashtra.

The Assessing Officer in order to verify the transaction issued notice under section 133(6) to all the parties. The notice sent through registered post was returned back with the remark “Left”. The assessee was asked to show-cause as to why the purchases shown from all the parties should not be treated as non-genuine. The assessee in order to substantiate the purchases stated that the goods were delivered by the said parties and are reflected in the books of account. The payments were made through cheques only. After considering the submission of Mum 2018-Anil Narayan Lokre assessee, the Assessing Officer concluded that the assessee not been able to furnish evidence of transportation details and delivery challans.

On appeal before the addition was restricted to the extent of 15%. The ld. CIT(A) while restricting the disallowances relied upon the decision of Hon’ble Gujarat High Court in case of Simith P. Seth (356 ITR 451). The ld. CIT(A) also concluded that the assessee has shown the GP ratio for last three years ranging from 6.01% to 12.63%, the Assessing Officer estimated the profit @ 25% which is on higher side.

We have heard the submission of ld. Departmental Representative (DR) for the revenue and ld. Authorized Representative (AR) of the assessee and perused the material available on record. The ld. DR for the revenue supported the order of Assessing Officer. The ld. DR further submits that Investigation Wing of Income-tax Department has 4 Mum 2018-Anil Narayan Lokre made full-fledged investigation in respect of hawala traders. The hawala traders were/are engaged in providing bogus bill without actual delivery of goods. The assessee has shown bogus purchases only to inflate the profit. The ld. DR for the revenue submits that the Assessing Officer has brought sufficient material on record to prove that the purchases shown by assessee were bogus. The assessee is not entitled for any relief. The ld. DR for the revenue prayed for setting-aside the order of ld. CIT(A) and to restore the order of Assessing Officer.

On the other hand, the ld. AR of the assessee submits that the assessee furnished complete details of purchases and the corresponding sales made against the purchases. The Assessing Officer has not rejected the books of account. The Assessing Officer made the disallowance of 25% of the alleged bogus purchases. The Assessing Officer has not considered the Gross Profit Ratio for earlier years as well as for the year under consideration. The additions made on account of alleged bogus purchases by Assessing Officer was unreasonable. The ld. CIT(A) after considering the Gross Profit declared in three earlier consecutive years restricted the disallowance to 15%. Though, the purchases of assessee are genuine, however, the assessee accepted it to buy peace. The ld. AR prayed for dismissal of present appeal.

We have considered the submissions of both the representatives and perused the record. The Assessing Officer made the disallowance of 5 ITA No. 5296 Mum 2018-Anil Narayan Lokre 25% of the alleged bogus purchases. The Assessing Officer has not disputed the sales of the assessee. The Assessing Officer solely relied upon the report of Investigation Wing of Sale Tax Department. The Assessing Officer has not rejected the books of account of the assessee.

In the result, appeal of the revenue is dismissed.