KAILASH BROTHERS,MUMBAI vs. ASST CIT 19(2), MUMBAI

3. Whether commissioner of Income-Tax (Appeal) is correct in law in and fact in upholding the additional profit margin of Rs.15,18,490/- on purchases of Rs.5,06,16,362/-. The assessment for impugned AY was framed by Assistant Commissioner of Income Tax 19(2), Mumbai [AO] u/s 143(3) read with Section 147 of the Income Tax Act, 1961 on 27/03/2015 wherein the assessee has been saddled with estimated additions of Rs.40.49 Lacs against certain alleged bogus purchases of Rs.506.16 Lacs computed @8%. The assessee was a resident firm and stated to be engaged as trader & manufacturer of diamond during impugned AY. 2.1 The reassessment proceedings were initiated pursuant to receipt of certain information from DGIT (Investigation) that the assessee took accommodation entries of purchases aggregating to Rs.506.16 Lacs from 7 parties, the details of which have already been extracted at para- 4 of the quantum assessment order. The said information sprung out of search & survey action in the case of Shri Bhanwarlal Jain Group on 03/10/2013 wherein it transpired that the said group, through web of numerous entities was engaged in providing accommodation entries of varied nature. The partners / directors / proprietors of these concerns were mere name-sake and well acquainted with the said group and the group was actually controlling all these concerns. 2.2 Accordingly, the assessee was required to substantiate the purchase transactions stated to be carried out with 7 entities. The ITA.No.3793/Mum/2017 Kailash Brothers Assessment Year-2009-10 assessee defended the same by submitting that the purchases were genuine and entered in stock register and the payments were through banking channels. At the same time, the assessee failed to produce any of the party for confirmation of transactions and also failed to substantiate the delivery of goods. Therefore, taking a contrary view, Ld. AO opined that the purchases as stated to be made from these parties were bogus whereas actual purchases were made from the open market. The Ld. AO also opined that the genuineness of the purchase parties was under doubt but the genuineness of purchase on a whole could not be doubted since the purchases were entered in the stock register. Finally, the additions against the same were estimated @8% which resulted into impugned additions of Rs.40.49 Lacs in the hands of the assessee.

Aggrieved, the assessee agitated the same with partial success before first appellate authority. The Ld. CIT(A), after due consideration of factual matrix and several judicial pronouncements on the subject, primarily agreed with the approach & conclusion of Ld. AO. However, finding the estimation of 8% on the higher side, the same was reduced to 3% of alleged bogus purchases which restricted the impugned additions to Rs.15.18 Lacs. Aggrieved, the assessee is in further appeal before us.

The Ld. Auhtorized Representative for Assessee [AR], Shri Bharat P.Shah, agitated the estimation by reiterating the contentions as raised before lower authorities. It was submitted that the confirmation of the suppliers was on record and therefore, the additions were not justified. Per Contra, Ld. DR submitted that no further relief could be granted to the assessee since the purchase transactions were under grave doubt.

The appeal stand dismissed.