KISORE CHUNILAL MEHTA,MUMBAI vs. ITO 19(2)(2), MUMBAI

ORDER

PER N.K. PRADHAN, AM

filed by the assessee read as under:

1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A)- 2, Mumbai erred in confirming the addition made by the Assessing Officer of Rs.9,40,335/- being 12.5% profit element on treating the genuine purchases of Rs.75,22,686/- as non-genuine purchases out of total purchases of Rs.6,59,45,889/- considering the purchases as bogus from the parties of which information has been received from Sales Tax Department and the said information has been forwarded by the DCIT(Inv.), Wing, Mumbai to the Assessing Officer. Provisions of the Act ought to have been properly construed and regard being had to facts of the case no such additions to be made. Reasons assigned by him are wrong and insufficient to justify the additions.

2. The order made u/s 143(3) r.w.s. 147 of the Act by the Ld. AO is bad-in- law, ultra-virus and without appreciating the facts and law in their proper perspective and is liable to be annulled.

3. Briefly stated, the facts are that the assessee filed his return of income for the AY 2009-10 on 28.09.2009 declaring total income of Rs.6,03,500/-, which was processed u/s 143(1) of the Act accepting the returned income. Thereafter, the AO completed the assessment u/s 143(3) on 16.11.2011 determining the total income at Rs.6,90,720/-.

Kishore C. Mehta 3 3317, 3318 & 3319/Mum/2018 Subsequently, the AO received information from the Director General of Income Tax (Inv), Mumbai that the assessee had obtained accommodation entries from entry providers who have been issuing bogus sales/purchase bills without physical delivery of the materials. The AO noted that the assessee had obtained accommodation entries amounting to Rs.75,22,686/- from 12 parties during the year under consideration. Accordingly, the AO issued notice u/s 148 on 14.03.2014. During the course of re-assessment proceedings, in response to a query raised by the AO, the AR of the assessee filed (i) purchase invoice of the specified party, (ii) copies of bank statements evidencing payments made through banking channels by issuing account payee cheques in respect of all the parties, highlighting the relevant entries, (iii) chart showing the details of purchases of the alleged parties and (iv) quantitative tally in respect of the entire purchases from the above named parties and the corresponding sales. During the course of re-assessment proceedings, the AO issued notice u/s 133(6) to the said parties. However, the notices were returned back by the postal authorities with the remark ‘not found’. The AO asked the assessee to produce the said parties before him for cross- examination. However, the assessee failed to do so. Also the AO noted that the assessee could not file documents such as delivery challans, transport receipts, octroi receipts, excise gate pass, goods inward register. Therefore, the AO came to a finding that the purchases of Rs.75,22,686/- made from the said parties by the assessee were not genuine. However, the AO was of the view that the intention of indulging Kishore C. Mehta 4 ITA Nos. 3316, 3317, 3318 & 3319/Mum/2018 in such activities by the AO was to suppress the true profits and reduce the tax liability. Therefore, the AO relying on the decision in CIT v. Simit P. Sheth (2013) 356 ITR 451 (Guj) estimated the profit @ 12.5% on the disputed purchases of Rs.75,22,686/- and brought Rs.9,40,335/- to tax.

Kishore C. Mehta 5 3317, 3318 & 3319/Mum/2018

Kishore C. Mehta 6 3317, 3318 & 3319/Mum/2018