RANJAN RAMESH DOSHI,MUMBAI vs. INCOME TAX OFFICER WARD-27(3)(1), MUMBAI

Aayakr ApIla saM./ (inaQa-arNa baYa- / Assessment Year 2009-10) Smt. Ranjan Ramesh Doshi Income Tax Officer, Ward A/501, Shankeshwar Tower, 27(3)(1) Sudha Park, Shanti Path, Ward 27(3)(1), Tower, 6, Vs. Ghatkopar (East) Vashi Railway Station Mumbai-400 077 Complex, Navi Mumbai-400 703 .. (p`%yaqaaI- / Respondent) (ApIlaaqaI- / Appellant) स्थायी लेखा िं./PAN No. AEMPD3478F अपीलाथी की ओर े / Appellant by : Shri KL Vajani, AR प्रत्यथी की ओर े / Respondent by : Shri SK Bepari, DR ुनवाई की तारीख / Date of hearing: 29.10.2018 घोषणा की तारीख / Date of pronouncement : 05.11.2018 AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:

This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-25, Mumbai [in short CIT(A)], in appeal No. CIT(A)-25/IT-231/2015-16/290 vide dated 03.01.2018. The Assessment was framed by the Income Tax Officer, ward-27(3)(1) Mumbai (in short ‘ITO/ AO’) for the A.Y. 2009-10 vide dated 24.03.2015 under section 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).

“(a) On the facts and in the circumstances of the case, the Commissioner of Income-tax (Appeals), hereinafter referred to as the “CIT(A)”, has erred in confirming the disallowance of ₹ 17,63,039/- made by the assessing officer on account of purchases made from alleged suspicious dealers as listed on the web-site of the Maharashtra VAT Department.

(b) On the facts and in the circumstances of the case, the CIT(A) has erred in not appreciating correct facts of the case and also the documentary evidences laid down by the appellant.

(c) Without prejudice to any of the above grounds, on the facts and in the circumstances of the case, the CIT(A) has erred in estimating the profit margin of the impugned purchases @ 12.5% without appreciating the facts of the case of the appellant.”

Name of party Amount National Trading Co. 37,492 Siddhivinayak Trading 2,86,094 Deepali Enterprises 3,15,763 Balaji Trading 4,54,635 Rekha Trading co 73,008 Ankit Enterprises 85,800 Shree Jalaram Enterprises 5,63,210 GR Trading Link 6,08,514 Sun Enterprises 5,24,598 MR Construction 12,41,517 Shradhha Trading Co. 24,28,585 Universal Enterprises 43,99,100 Neptune Corporation 5,13,567 Mahavir Enterprises 81,120 Jay Industries 24,91,306 4. The AO issued noticed under section 133(6) to the parties which returned back as unserved and assessee failed to produce these parties. During the course of assessment proceedings and during appellate proceedings, the assessee submitted documentary evidences such as payment received against such sales, receipt of material purchases, account payee cheque. According to the AO, the assessee failed to establish the genuineness of the purchase and accordingly, he made addition of unproved purchase at 12.5% of ₹ 17,63,039/- to the returned income of the assessee Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) also confirmed the action of the AO by observing in paras 5.3.5 by following the decision of Hon’ble Gujarat High court in the case of CIT vs. Smith P. Seth (2013) 356 ITR 451 (Guj) by observing as under: -

“5.3.5 In view of the facts and circumstances of the case and the judicial pronouncements cited above, what can’t be disallowed or taxed in the instant case, is the excess profit element embedded in such purchases shown to have been made from aforesaid parties. As narrated earlier, the AO in this case has held that the parties from whom the purchases were made by the appellant were found to be bogus estimations ranging from 12.5% to 25% have been upheld by the Hon’ble Gujarat High Court, depending upon the facts of the case. In a number/ series of recent case involving similar set of facts as in the instant case, the Hon’ble Mumbai Tribunal as estimated the G.P. addition on account of such bogus purchases as 12.5% some of which are listed below:

……………………………………………………… ……………………………………………………… ……………

In view of the above discussed factual matric and precedence, I am of the view that the AO is justified in estimating the profit element calculated 12.5% embedded in impugned purchase of ₹ 1,41,04,309 shown from the alleged hawala parties and adding the same to the total income returned. The assessment order of the AO is a well-reasoned and a speaking order giving in detail the reasons for his fair estimation and therefore, I do not see any reason to take …. In the matter different from the one taken by the Assessing Officer. The action of the AO in estimation of 12.5% GP is sustained. Thus, the grounds of appeal No 1 & 2 are dismissed.”

5. I have considered the issue and gone through the facts and circumstances of the case. I find from the facts of the case and argument of both the sides that the CIT(A) has confirmed the profit rate at the rate of 12.5%, which according to me is on higher side going by the nature of business of the assessee i.e. supplier of Industrial goods & Item. I am in full agreement with the contentions raised by the assessee before CIT(A) and according to me a profit rate of 12.5% is on higher side as assessee has also paid the VAT element on these bogus purchases, a further deduction in estimation of profit to the extent of 4.5% can be allowed. Hence, I direct the AO to recompute the income after applying profit rate at the rate of 8% and compute the income accordingly. The appeal of the assessee is partly allowed.

Order pronounced in the open court on 05-11-2018. AadoSa kI GaaoYaNaa Kulao mao idnaMk 05-11-2018 kI ga[- .