SOHANLAL BOHRA,MUMBAI vs. ITO 19(3)(4), MUMBAI

These appeals filed by assessee are directed against the order of Commissioner of Income Tax (Appeals)-2, Mumbai [hereinafter referred to as the ld CIT(A)] dated 01/02/2018 for A.Y.2007,08, 2010-11 & 2011- 12 in the matter of orders passed u/s.143(3) r.w.s. 147 of the Income 2 to 3745/Mum/2018 Shri Sohanlal B Bohra Tax Act, 1961. These appeals are taken up together and disposed off by this common order for the sake of convenience.

Let us take up the appeal for the A.Y.2007-08 in . The assessee has raised a preliminary ground on validity of reopening of the assessment vide ground No.1 for the A.Y.2007-08.

The brief facts of this issue are that the assessee for the A.Y.2007- 08 filed his original return of income on 23/07/2007 declaring total income of Rs.8,38,050/- which was duly processed u/s.143(1) of the Act. Later the assessment was sought to be reopened by issue of notice u/s.148 of the Act dated 26/03/2014. The reasons recorded by the ld. AO for reopening the assessment are as under:- “The reason recorded for issue of notice u/s. 148 of the IT. Act, 1961 is as under: " Information has been received from the DGIT(Inv.) Wing, Mumbai bogus unsecured loans and advances entries by Bhavarlal Jain Group. Details of the parties who have issued accommodation bills to the assessee are as under: S.No. Name of the Hawala PAN Bill Amount parties 1 1 MOHIT ENTERPRISES ACRPK1211G 5,00.000/- TOTAL 5,00,000/- On the basis of the aforesaid information, I have reason to believe that income assessable to tax as indicated above to the tune of Rs.5,00,000/-, has escaped assessment within the meaning of section 147 of the I. T. Act, 1961. Accordingly, the case is being re-opened u/s. 147 of the I.T. Act, tor A.Y 2009-10.

The ground No.3 raised by the assessee is as to whether the ld. CIT(A) was justified in confirming the addition of Rs.5 lakhs towards unsecured loans received from M/s Mohit Enterprises in the facts and circumstances of the case. 5.1. We have heard the rival submissions. It is not in dispute that assessee had borrowed loan of Rs. 5 lakhs during the year under consideration from M/s. Mohit Enterprises. The assessee in support of this loan, had furnished copies of ITR acknowledgement of loan creditor, confirmation of balance from loan creditor, audited balance sheet and bank statements of the loan creditor together with an affidavit of the said loan creditor. The assessee also furnished his bank statements for the relevant period. The assessee stated that the subject mentioned loan received by the assessee from M/s. Mohit Enterprises had been duly repaid to the said party on 18/05/2007 and the said loan was also subjected to payment of interest after due deduction of tax at source at 6 to 3745/Mum/2018 Shri Sohanlal B Bohra the applicable rates. The evidences in this regard are enclosed in pages 53 to 63 of the paper book filed before us. These facts are not in dispute before us. We find that in the instant case, the assessee had furnished basic details regarding loan creditor proving the identity, creditworthiness of the creditor and genuineness of the loan transaction. After this, the onus shifts to the ld. AO for making further enquiries, if he so desires. In the instant case, no notice u/s.133(6) of the Act or summons u/s.131 of the Act was issued by the ld. AO to the concerned loan creditor to examine the veracity of the documents submitted by the assessee. In view of this, the assessee voluntarily filed an affidavit from the concerned loan creditor which are enclosed in pages 60 & 61 of the paper book wherein the said loan creditor had duly confirmed the entire transaction being carried out by account payee cheques, loans given to the assessee, loans received back from the assessee, the interest paid by the assessee and TDS thereon. The said loan creditor had also duly affirmed in his affidavit that loan was advanced by him to the assessee out of sufficient balances available with him from the disclosed bank account. All these facts clearly go to prove that the said loan is genuine transaction and does not deserve to be viewed with a jaundiced eye. We also find that similar loan received from M/s. Mohit Enterprises together with other parties had been accepted as genuine by the Co-ordinate Bench of this Tribunal in the case of DCIT (CC)-(1)(3) vs. Jainam Investments in ITA No.6099/Mum/2016 for A.Y.2012-13 dated 10/08/2018 wherein the 7 to 3745/Mum/2018 Shri Sohanlal B Bohra addition made u/s.68 on similar grounds had been deleted by this Tribunal. Respectfully following the same, we also delete the addition made u/s.68 of the Act in the facts of the instant case. Accordingly, we have no hesitation in directing the ld. AO to delete the addition made u/s.68 of the Act in the sum of Rs.5 lakhs on merits. Accordingly, the appeal of the assessee for A.Y.2007-08 is partly allowed.

Now, let us come to appeals of the assessee for A.Y.2010-11 and 2011-12 wherein the ld. AO had made disallowance of bogus purchases of Rs.3,00,249/- and Rs.18,57,473/- for A.Yrs 2010-11 and 2011-12 respectively. Admittedly, both these additions were made by applying 12.5% profit on the total value of purchases. It is the contention of the revenue authorities that based on the investigation carried out by the Sales Tax department of Maharashtra and thereafter, information received from DGIT (Investigation), Mumbai in this regard, certain entities were involved in providing accommodation entries in the form of issuing bogus purchase bills to various assessees. The assessee was found to be one of the parties, who had received bogus purchase bill from the said tainted entities as detailed in the assessment orders for the respective years. 6.1. We have heard rival submissions. We find that similar issue of bogus purchases has been the subject matter of adjudication by this Tribunal in various cases. However, in the instant case, the assessee had only purchased the materials from the grey market in order to avoid VAT 8 ITA Nos.3743 to 3745/Mum/2018 Shri Sohanlal B Bohra and had substituted the same by obtaining accommodation bill containing VAT. The assessee had duly made payments for the said bill and also to the concerned suppliers who had allegedly supplied bogus bills, and that only the VAT portion is the profit which the assessee had actually made in the instant case. The said materials which were purchased were duly sold by the assessee which has been accepted by the ld. AO. In other words, sales reflected by the assessee have not been disputed by the ld. AO. Out of the alleged bogus purchases on the said sale, profit element is also embedded and that has been duly disclosed by the assessee in his regular returns of the income. Hence, there is no need to make separate addition towards profit. We have already held that the assessee had made profit in the form of VAT portion by purchasing the goods from grey market. Hence, what is to be added is only the VAT portion. The ld. AR submitted that the VAT rate for A.Y.2010-11 was 4% and for A.Y.2011-12 it was 5%. Hence, we hold that the profit margin to be added is only the rate of VAT applicable in the relevant years.