CHETAN P. SHAH,MUMBAI vs. ITO 30(1)(2), MUMBAI

The present appeal has been preferred by the assessee against the order dated 23.02.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2012-13.

The only issue raised by the assessee is against the part confirmation of addition to the extent of Rs.12,00,000/- out of total of Rs.29,89,656/- made by the AO on account of bogus purchases.

The facts in brief are that the assessee filed the return of income on 26.09.2012 declaring an income of Rs.4,57,200/-. The case of the assessee was selected for scrutiny. During the 2 Shri Chetan P. Shah course of assessment proceedings AO issued notice under section 133(6) to five parties who did not respond despite having received the said notices and accordingly the AO came to the conclusion that assessee has made non genuine purchases to the tune of Rs.5,68,03,480/- as the assessee could not prove the genuineness of the purchases and the books of accounts of the assessee were also rejected under section 145(3) of the Act. Finally an addition of Rs.29,89,657/- was made to the income by applying a rate of 5% by dividing the purchases by 95% .

In the appellate proceedings, the Ld. CIT(A) partly allowed the appeal of the assessee by sustaining the addition to the extent of Rs.12,00,000/- and deleting the addition to the extent of Rs.17,89,656/- by observing that it is not a case where the spot enquiry was conducted nor any adverse finding against them by any other government agency. The Ld. CIT(A) observed that assessee has filed confirmation from most of the parties and thus sustained the disallowance to the extent of Rs.12,00,000/-.

After hearing both the parties and perusing the material on record, we observe that in the present case the assessee is not involved in any hawala transactions of bogus purchases. It is only the case of the AO that during the assessment proceedings the notices issued under section 133(6) to the suppliers were not responded by them and therefore addition of Rs.29,89,656/-was made. The Ld. A.R. also submitted before us that the assessee is dealing in grey cloth and there is no sales tax payable on the said items and thus prayed before the Bench that the assessee has not indulged in any wrong doings and made any savings by making so called non genuine purchases when the sales of the 3 Shri Chetan P. Shah assessee are not disputed by the AO. The Ld. A.R. strongly assailed the order of Ld. CIT(A) on the part sustenance of addition without any reasoning at Rs.12,00,000/- which is without any basis and may be deleted. The Ld. D.R., on the other hand, prayed before the Bench that the addition as sustained by the Ld. CIT(A) is very reasonable and therefore prayed before the Bench that same should be confirmed by dismissing the appeal of the assessee. Since it is not a case of bogus purchase but a case where notices issued under section 133(6) were not replied by the suppliers. The ld CIT(A) has partly confirmed disallowance on adhoc without any justification which is excessive and unreasonable. Accordingly, we are of the view that addition of Rs.4,00,000/- would be reasonable and would meet the ends of justice. Accordingly, we reverse the order of Ld. CIT(A) and direct the AO to make an addition of Rs.4,00,000/-.

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