ITO 17 (1)(5), MUMBAI vs. HEMANSHU HARILAL MEHTA, MUMBAI

आदेश / O R D E R

Per Bench: -

Hemanshu Harilal Mehta Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-56/ITO- 17(1)(5)/2017-18/678 dated 27/06/2018 on following grounds of appeal: - On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in reducing the disallowance at 8% as against 12.5% adopted by the A.O. in respect of bogus purchases.” 2.1 Facts on record would reveal that the assessee being resident individual stated to be engaged in trading of hardware items was assessed u/s 143(3) r.w.s 147 of Income Tax Act, 1961 on 28/09/2016 wherein the assessee was saddled with estimated additions of Rs.1.44 Lacs on account of suppression of profit in lieu of inflated purchases. Pursuant to receipt of certain information from DGIT (Investigation), it transpired the assessee made purchases of Rs.11.55 Lacs from a suspicious entity namely M/s Parikh Multi Trade. Accordingly, as per due process of law, the case was reopened vide issuance of notice u/s 148 on 29/03/2016 followed by statutory notices u/s 143(2) & 142(1), wherein the assessee was directed to substantiate the purchases. 2.2 Although the assessee defended the purchases, however, notices issued u/s 133(6) to the said entity remained un-served / un-responded to and the assessee also failed to produce the said supplier. Resultantly, the assessee was saddled with estimated additions of 12.5% against these purchases. The learned first appellate authority reduced the estimate to 8%, against which the revenue is under appeal before us. It appears that the assessee has not preferred any further appeal. We have heard and considered the rival submissions.

Hemanshu Harilal Mehta 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. It transpires that the assessee was in possession of primary purchase documents and the payments to suppliers were through banking channels. The sales turnover reflected by the assessee has not been disturbed / disputed by Ld. AO. However, at the same time, the assessee miserably failed to prove the delivery of material. Notices issued u/s 133(6) remained un-responded to. 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, which Ld. first appellate authority has rightly done. Therefore, concurring with the approach of learned first appellate authority in restricting the additions to 8%, we dismiss the appeal.

Order pronounced in the open court on 16th September, 2019.