MODY INTERIORS P.LTD,MUMBAI vs. ITO WD 16(3)(1), 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 2009-10.

The only issue pressed at the time of hearing is with respect to the sustenance of addition to the extent of Rs.3,80,427/- by ld CIT(A) by directing the AO to apply 12.50% of the total alleged bogus purchases. Accordingly other grounds are dismissed as not pressed.

The facts in brief are that the assessee filed its return of income on 30.9.2009 declaring an income of Rs.16,54,161/- which was processed u/s 143(1) of the Act. Thereafter, the case was re-opened by the AO after receiving information from DGIT(Inv) Mumbai that assessee has obtained the bogus purchase accommodation bills from M/S Niddhish Impex Pvt Ltd. to the tune of Rs. 15,35,504/-. Thereafter, after recording the reasons to believe that the assessee’s income has escaped assessment to the extent of Rs. 15,35,504/- issued notice u/s 148 of the Act dated 21.2.2014.During the assessment proceedings the AO found on the basis of information/details filed by the assessee that assessee has availed accommodation bills from two parties to the tune of Rs. 30,43,417/- whose tin match with the tins of the hawala operators published by the Sales Tax Deptt., Govt of Maharashtra. Upon assessee failing to file the necessary details before the AO, he treated the entire purchases as bogus and added the same to the income of the assessee vide assessment framed vide order dated 30.3.2015 passed u/s 143(3) r.w.s 147 of the Act.

In the appellate proceedings, the ld CIT(A) partly allowed the appeal of the assessee by sustaining the addition at 12.50% of the bogus purchases by observing that the AO has not disputed the sales of the assessee by following the decision of Gurarat High Court in the case of CIT Vs Simit P Sheth 38 Taxmann.com 385 (Guj).

We have heard the rival parties and perused the materials on records as placed before us. We note that the addition made by the AO equal to 100% by the AO were reduced to 12.50% by 3 M/s. Mody Interiors Pvt. Ltd. CIT(A) on the ground that the sales were not disputed. In this we further find that the G.P. rates in the three years in juxtaposition are 13.90%, 14.67% and 19.05% for AY 2007-08, 2008-09 and 2009-10 respectively. The motive behind the application of GP rate to the bogus purchases is to assess the profit embedded in the said purchases which may be due to the reasons that assessee might have made some savings by purchasing the goods from grey markets while the normal profits on the said purchases stood disclosed as these are duly accounted for. It was also contended before us that only purchases from Niddhish Impex Pvt. Ltd are only bogus whereas the other party is not bogus party. Moreover the GP shown by the assessee during the year is 19.05% which is higher than the earlier two years. Under these circumstances, we are of the opinion that a reasonable disallowance keeping in view the GP already shown by the assessee should be made. Accordingly we direct the AO to apply a GP rate of 6% to the bogus purchases as against 12.50 % .

The appeal of the assessee is partly allowed.