ABHAY AMBALAL SHAH,MUMBAI vs. ITO WD 3(1), KALYAN

This is an appeal filed by the assessee against the order of CIT(A)- 3, Thane dated 23/01/2017 for A.Y.2011-12 in the matter of order passed u/s.143(3) r.w.s. 147 of the IT Act.

In this appeal, assessee is aggrieved for the addition made on account of bogus purchases amounting to Rs.10,98,627/- by estimating 12.5% of net profit of alleged unproved purchases.

Brief facts of the case are as under:- The assessee is engaged in the business of Trading of Building material, Proprietor of Dhanshree Enterprises. On the basis of information received from Sales Tax Department and Investigation Wing, the AO noticed that the assessee was a beneficiary of Hawala entry operators. The assessee had shown purchases amounting to Rs. 38,35,252 from three parties (Para 1 of AO order), who were listed by the Sates Tax authorities as Hawala operators i.e. only providing Bills without there being any actual transaction of purchases or sales. Therefore, the AO issued notice u/s. 148 of the I.T. Act, to the assessee and re-opened the assessment proceedings. During the course of the assessment proceedings, the AO asked the assessee to establish the genuineness of the purchases shown from all such parties. The assessee filed copies of purchase bill, bank book, cash book, ledgers, financial statements and also stated that the payment to all the parties had been made through cheques. During enquiries u/s 133(6), the notices issued by the AO were returned unserved by the postal department with remarks "Left and not known" in respect of two parties and in respect of remaining three parties no responses was received. The assessee could not produce the parties or Ledger accounts of the assessee in the books of the said supplier. In para 4.2 of the order, the AO stated that the hawala parties have in their affadavits affirmed that they had not done any activity of sale and purchase. The AO therefore, after rejecting the Docks of accounts of the assessee u/s. 145(3) of the IT. Act for not being complete and correct, added the amount of Rs. 38,35,252 to the assessee’s income by resting all such purchases as bogus purchases.

I have heard both the Counsel and perused the records. I find that assessment in this case have been reopened after receiving cogent information the Maharashtra Sales Tax Department with the suppliers from whom the assessee has claimed to have made the impugned purchases are bogus. The suppliers have affirmed that they have not supplied goods rather they have provided only accommodation bills.

The learned CIT(A) has restricted the disallowance to 12.5%.

Against this, assessee has now submitted that the purchases are genuine and no disallowance should have been done.

I find that the findings of the Assessing Officer clearly states that assessee has been indulging in bogus purchases. No evidence regarding the actual transportation of goods has been provided by the assessee. Despite the above, the learned CIT(A) has allowed substantial relief, but the assessee is still aggrieved and wants to prove that the purchases are genuine.

In this regard, the learned Departmental Representative has referred to the decision of the Hon’ble Rajasthan High Court in the case of CIT v. M/s.Carpet Mahal in D.B.Income Tax Appeal No.170 of 2009, wherein the Hon’ble High Court has held as under vide order dated 10.05.2017:- "3. Considering the law declared by the Supreme Court in the case of Vijay Proteins Ltd. Vs. Commissioner of Income Tax, Special Leave to Appeal (C) No.8956/2015 decided on 06.04.2015 whereby the Supreme Court has dismissed the SLP and confirmed the order dated 09.12.2014 passed by the Gujarat High Court and other decisions of the High Court of Gujarat in the case of Sanjay Oilcake Industries Vs. Commissioner of Income Tax (2009) 316 ITR 274 .(Guj) and N.K. Industries Ltd. Vs. Dy. C.I.T., Tax Appeal No.240/2003 decided on 20.06.2016, the parties are bound by the principle of law pronounced in the aforesaid three judgments.

We remit back the case to the Assessing Officer for deciding afresh on the factual matrix. The authority will accept the law but the transaction whether it is genuine or not will be verified by the Assessing Officer on the basis of the aforesaid three judgments. The issues are answered accordingly. The appeal is accordingly disposed of."

In the result this appeal filed by the assessee is stands allowed for statistical purposes.