ASHOKA BUILDERS,MUMBAI vs. ACIT RG 19(3), MUMBAI

Assessee challenged the order of the Ld.CIT(A) in passing an exparte order without giving sufficient and reasonable opportunity to represent the appeal. On merits assessee challenged the order of the (A. Y: 2009-10) M/s. Ashoka Builders Ld.CIT(A) in confirming the disallowance made towards unproved purchases.

At the outset, Ld. Counsel for the assessee submits that the Ld.CIT(A) stated that on several occasions the case was posted and there was no compliance and the notice dated 21.12.2017 has been served on 17.01.2018 and there was no compliance and ultimately the order passed by the Ld.CIT(A) on 25.01.2018. Ld. Counsel for the assessee submits that one more opportunity should have been given by the Ld.CIT(A) to the assessee though Ld.CIT(A) stated that several opportunities were given to the assessee. As is evident from the order, notice fixing date of hearing on 17.01.2018 was served on the assessee on 17.01.2018 and the order was passed on 25.01.2018. Coming to the merits of the case the Ld.Counsel for the assessee submits that similar addition has been made during the A.Y. 2010-11 and this amounted to double addition. Ld.Counsel for the assessee submits that, at best Assessing Officer could have added the profit element in the purchases but not the entire purchases as unexplained purchases.

We have heard the rival submissions, perused the orders of the authorities below and the material placed before us. We have noticed from the material placed before us that through notice dated 21.12.2017

Coming to the merits of the case, it is the submission of the Ld.Counsel for the assessee that similar addition has been made in the A.Y. 2010-11 where the very same amount was added and the Tribunal in ITA.No. 1647/Mum/2014 dated 28.03.2018 directed the Assessing Officer to verify the fact as to whether the very same amount was added in A.Y. 2009-10 & 2010-11. On a perusal of the order of the Tribunal we notice that the Tribunal directed the Assessing Officer to examine the fact, whether this addition was already added in the A.Y. 2009-10.

We find that the Assessing Officer accepted the sales from the said purchases as genuine without there being any purchases there cannot be any sales. The Hon'ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd [355 ITR 290] held that when the assessee made purchases and sold the finished goods as a natural corollary not the entire amount covered under such purchases would be subject to tax but only the profit element embedded therein. The Hon'ble High Court confirmed the order of the ITAT in estimating the profit element from purchases at 12.5%. Similar view has been taken by the Hon'ble Gujarat High Court in the case of CIT v. Simit P. Seth [356 ITR 451] and confirmed the order of the ITAT in estimating the profit element from the purchases at 12.5%. The Bombay High Court in the case of CIT v. Nikunj Eximp

In view of the above decisions and taking all the facts and circumstances into consideration, we direct the Assessing Officer to estimate the profit element from such non-genuine purchases at 12.5% for the Assessment Year 2009-10. We order accordingly.

In the result, appeal of the assessee is partly allowed.