SAI MAHAVIR DEVLOPERS,NAVI MUMBAI vs. DEPUTY COMMISSION OF INCOME TAX, CENTRAL CIRCLE-1, THANE

The above cross appeals one by the Revenue and the other by the assessee have been preferred against the order dated 27.03.2017 of the Commissioner of Income Tax (Appeals)

The issue in ground No.3 is against the part confirmation of addition equal to 25% of the bogus purchases by Ld. CIT(A) as against the 100% added by the AO.

The facts in brief are that the assessment was framed in this case under section 143(3) read with section 153B(1)(b) of the Act vide order dated 25.03.2013 assessing the income of Rs.6,58,32,890/- by making addition of Rs.95,76,355/- on account of bogus purchases. The AO added the said purchases following an information received from DGIT Investigation Wing, Mumbai that assessee is beneficiary of hawala purchase entries from 3 parties namely M/s. Akshata Enterprises Rs.3,40,220/-, M/s. Praveen Steel Traders Rs.14,66,382/-, M/s. Top Bricks and Sand Suppliers Rs.77,69,753/-. The AO rejected the contentions of the assessee made during the course of assessment proceedings and treated the entire purchases as non genuine on the basis of DGIT information as the assessee could not satisfactorily explained the purchases from these parties.

The Ld. CIT(A) partly confirmed the addition at 25% of the total bogus purchases on the basis that assessee has shown overall profits of 25% and accordingly the profit element embedded in the said alleged purchases were directed to be assessed at 25% of such purchases.

The Ld. D.R., on the other hand, relied on the order of the AO by submitting that the assessee was found to be beneficiary of hawala purchase entries which was unearthed during the course of investigation by the Sales Tax Department and found that the suppliers were engaged in providing bogus accommodation entries without supplying any material and therefore the order of AO may kindly be affirmed.

After hearing both the parties and perusing the material on record, we observe that the identical issue has been decided by the co-ordinate bench of the Tribunal in assessee’s sister concern case in A.Y. 2012-13 and 4348/M/2017 A.Y. 2011-12 vide order dated 28.11.2018 wherein the addition was reduced to 3% on account of alleged bogus purchases as against the 25% sustained by the Ld. CIT(A). The operative part is reproduced as under: “7. After hearing both the parties and perusing the material on record, we find that undisputedly the assessee has availed bogus bills in respect of purchases from the said parties to the tune of Rs.28,81,637 for A.Y. 2011-12 and Rs.5,24,948/- for A.Y. 2012-13. We find that the AO has not disputed the consumption of material in the development of property meaning thereby that assessee might have purchased the goods from the grey market and under these circumstances it is only the percentage of the total such purchases has to be brought to tax. The Ld. CIT(A)

Since the facts of the case before us are materially same to the case as decided by the co-ordinate bench of the Tribunal above, we are therefore inclined to set aside the order of Ld. CIT(A) and direct the AO to make the addition @ 3% of the alleged bogus purchases. Appeal of the assessee is partly allowed.

In the result, the appeal of the assessee is partly allowed and the appeal of the Revenue is dismissed.