DCIT 15(3)(2), MUMBAI vs. SAVANI CONSTRUCTIN CO. P.LTD, MUMBAI

O R D E R

Per Rajesh Kumar, Accountant Member

1. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the addition of Rs. 67,82,266/- on account of bogus purchases to only 12.5% of the such bogus purchases, without giving any findings as to how 12.5% has been worked out and also ignoring that the assessee failed to discharge the onus on it to establish during the assessment proceedings, the genuineness of purchase which were made through bogus parties.” 2. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the addition on account of bogus purchases to only 12.5% of the bogus purchase, without appreciating the ratio of the decision of the Hon’ble Gujarat High Court in the case of N.K.Protiens Ltd., wherein it has been held that in the event of bogus purchases, the addition of whole of such purchases is required to be made and this decision has been confirmed by the Hon’ble Supreme court in SLP No. CC No. 769 of 2017, by dismissing the SLP of that assessee.” 3. “The appellant prays that the order of the CIT(A), Mumbai on the above directions be set-aside and that of the assessing officer be restored.” 4. “The appellant craves leave to amend or alter any of the aforesaid grounds or add a new ground of appeal

, which may be necessary, at any time before or at the time of hearing of appeal.”

2. The only issue raised by the revenue is against the order of CIT(A) restricting to 12.50% of the total bogus purchase by CIT(A) as against the 100% addition made by the AO of Rs. 67,52,266/-. At the out set the Ld ld. Counsel of the assessee submitted that the issue involved in the present appeal of estimation of profit on bogus purchases @ 12.5% is squarely covered by the decision of coordinate bench in assessee’s own case in AY 2009-10 and others wherein the Hon’ble Bench as held that the application of GP @ 12.5% by Ld. CIT(A) is reasonable and proper. The Ld. AR therefore submitted before the bench that the appeal filed by the revenue may kindly be dismissed as the Ld. CIT(A) has directed to the AO to apply GP of @12.5% in order to bring to tax the profit element on the bogus purchases. The Ld. Departmental Representative (ld. DR in short) on the other hand relied on the grounds of appeal by submitting that the principle of the resjudicata is not applicable to the income tax proceedings and thus each year an independent year. The ld DR therefore submitted that the present appeal may be decided independently and GP higher than 12.5% may kindly be directed to be applied on the bogs purchases.

3. After hearing both the parties and perusing the material available on record, we find that in the earlier year under similar facts, the coordinate bench has decided the issue in Mum/2016 AY 2009-10 wherein the coordinate bench has upheld the order of CIT(A) directing the addition to be made at @12.5% of bogus purchase. The relevant para is produced below:-

5. We have considered rival contentions an perused the material available on record. Undisputedly, on the basis of information obtained from the Sales Tax Department, the Assessing Officer has treated the purchases claimed to have been made from 11 parties as bogus and added them back to the income of the assessee. However, as observed by the Ld. CIT(Appeals), the AO has not disputed the sales/consumption of material purchased by the assessee. That being the case, the logical conclusion would be, the assessee might have purchased such goods/materials from some other source and to regularize such transactions has obtained accommodation bills. In view of the aforesaid facts, we agree with the Ld. CIT(A) that only profit element embedded in alleged bogus purchases can be considered for addition. Keeping in view the peculiar facts and circumstances of this case, we are of the opinion that estimation of profit at 12.5% by the learned Commissioner (Appeals) is reasonable and proper. Therefore, we uphold the same by dismissing the grounds raised

both by the Revenue and assessee in their appeal/cross objection.

4. We ,therefore, respectfully following the same hold that the estimation of GP by CIT(A) at 12.5% is reasonable and proper. Accordingly, the appeal of the revenue is dismissed.

CO.No.363/Mum/2018 The assessee has also filed CO challenging the reopening of assessment proceedings u/s 147 of the Act. The Ld. AR during the hearing did not press the issue raised by way of this cross objection and accordingly the CO filed by the assessee is dismissed.

The appeal of the revenue and cross objection by the assessee are dismissed .

Order pronounced in the open court on this day of 12th April, 2019.