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PER PAWAN SINGH, JUDICIAL MEMBER; 1. These three appeal by revenue are directed against the consolidated order of ld. CIT(A)-3 Nasik (Camp office Thane) dated 11.06.2018 for Assessment Year 2009-10, 2010-11 & 2011-12. In all appeals, the revenue has raised identical grounds of appeal
. Facts in all appeals are identical except variation of figures of disallowance of bogus purchases, therefore, all the appeals were clubbed, heard together and are decided by common order. For appreciation of fact, the appeal for Assessment Year 2009-10. Though the revenue has raised as many as seven grounds 5303 & 5302 Mum 2018-Shri Dinesh P Mehta of appeal, however, in our considered view, the only substantial ground of appeal is whether the ld. CIT(A) was not justified in restricting the disallowance of bogus purchases to the extent of 12.5% of bogus/hawala dealers/non-existent vendors.
2. Brief facts of the case are that the assessee is engaged in the business of Trader in industrial items, filed his return of income for Assessment Year 2009-10 declaring total income of Rs. 2,12,960/-. 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. The assessee allegedly made the purchases of Rs. 3,11,430/- from various parties, whose names were included in the list 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 was issued to the assessee which was received on 07.08.2013. The Assessing Officer after serving notice under section 143(2) proceeded for re-assessment. During the assessment, the 2 ITA No. 5304, 5303 & 5302 Mum 2018-Shri Dinesh P Mehta Assessing Officer noted that the assessee has shown purchases of Rs. 3,11,430/- from the following parties, which were declared as hawala dealers by the Sale Tax Department, Government of Maharashtra.
Name of the party Bill amount (Rs.) 1 R.J. Metal Industries 1,13,466/- 2 Amar Enterprises 4,118/- 3 Milestone Corporation 5,538/- 4 Payal Enterprise 12,610/- 5 M.R. Corporation 26,695/- 6 Coral Trading Co. 35,029/- 7 Marcon Enterprises 46,796/- 8 G.S. Enterprises 20,852/- 9 D.R. Trading Co. 21,937/- 10 V.K. Enterprises 24,388/- Total 3,11,430/-
The assessee was asked to substantiate the purchases and to furnish the Books, Ledger, Sales Register, description of goods, quantity, rate and amount. The date of dispatch of goods and the name of place along with mode of transportation by road or other mode, Vehicle Number, and payment details. The assessee in its reply stated that he has not taken any accommodation bills, all the transactions are genuine. Purchases were made vide valid tax invoices. The payments were made through account payee cheques. All the transactions are accounted in the books.
The assessee sold the material and the sales is accounted and the profit is credited to the Profit & Loss Account. The submission of assessee 5303 & 5302 Mum 2018-Shri Dinesh P Mehta was not accepted by Assessing Officer holding that the assessee has not satisfactorily explained the entire entries in its books of account. The assessee could not produce the documentary evidence of transportation of goods and delivery challan. The assessee has shown sales of Rs. 65,46,707/- and purchases of Rs. 58,91,195/-. Out of which, the purchases from alleged hawala dealers is Rs. 3,11,430/-. The Assessing Officer rejected the books of account of assessee and disallowed the entire alleged bogus purchases in assessment order dated 23.02.2015 passed under section 143(3) r.w.s 147.
On appeal before the ld. CIT(A), the ld. CIT(A) restricted the addition to the extent of 12.5%. 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 assessee might have made the purchases from grey market, operating in the grey market leads to various savings on account of non-payments of various taxes by use of unaccounted money and on such purchases, when sales are not disputed, the reasonable disallowances should be considered to avoid the revenue leakage. Thus, aggrieved by the order of ld. CIT(A), the revenue has filed the present appeal before us.
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 4 ITA No. 5304, 5303 & 5302 Mum 2018-Shri Dinesh P Mehta supported the order of Assessing Officer. The ld. DR further submits that Investigation Wing of Income-tax Department has 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.
On the other hand, the ld. AR of the assessee submits that the assessee furnished complete details of purchases and the sales made against the alleged bogus purchases. The Assessing Officer has wrongly rejected the books of account. The Assessing Officer made the disallowance of 100% of the alleged bogus purchases. The addition made on account of alleged bogus purchases was unreasonable. The ld. CIT(A) restricted the disallowance on reasonable basis.
We have considered the submissions of both the representatives and perused the record.
We have considered the submission of ld. DR for the revenue and ld. AR of the assessee. The Assessing Officer made the disallowance of 100% 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. Before 5 5303 & 5302 Mum 2018-Shri Dinesh P Mehta the ld. CIT(A), the assessee urged that the purchases shown by assessee are genuine. The payments of purchases were made through account payee cheques. The goods were received by assessee and quantitative details and corresponding sales of shown. Though the assessee fairly stated that they are unable to produce the supplier for verification.
However, the assessee has paid sale tax on behalf of the dealers and relied upon the decision of Hon’ble Gujarat High Court in Simith P.
Seth (supra). The ld. CIT(A) after considering the material placed before him and the ratio of the decisions including the decision of Simith P.
Seth concluded that it has been held by various Courts that where assessee could show that he has made purchases and there are corresponding sales against the purchases, in such circumstances, it is appropriate to tax the possible profit of such purchase from non-genuine parties. The ld. CIT(A) restricted the disallowance to 12.5% of the purchases of Rs. 3,11,340/-. We have noted that the ld. CIT(A) after considering the material and the various decision of superior courts arrived on a fair conclusion, which we affirm. The ld. DR for the revenue failed to bring any contrary decision to our notice to take any other view.
In the result, appeal of the revenue is dismissed.
ITA No. 5303/Mum/2014 A.Y. 2010-11 A.Y. 2011-12 6 ITA No. 5304, 5303 & 5302 Mum 2018-Shri Dinesh P Mehta
As we have noted above, the revenue has raised the identical grounds of appeal as raised in appeal for Assessment Year 2009-10. The disallowance made by Assessing Officer on account of alleged bogus purchases is also similar except variation of figure of purchases and the other similar hawala dealers. Considering our order for Assessment Year 2009-10 on similar ground, the appeal for Assessment Year 2010- 11 & 2011-12 are also dismissed with similar direction.
In the result, appeal of the revenue for all the AY’s are dismissed.
Order pronounced in the open court on 01/010/2019.