ACIT CIR 11(3)(1), MUMBAI vs. TOTAL TOOLS AND EQUIPMENTS P.LTD, MUMBAI

Whether on the facts and in the circumstances of the case and In law, the Ld.CIT(A) erred in ignoring the decision of the Hon'ble Punjab & Haryana High Court in the case of JR. Solvent Industries (Pvt.) Ltd. (2012) (22 taxmann.com 115) wherein it was held that where purchases were made from a non-existing seller, same would be held to be bogus even if complete quantitative details of purchase were available in the assessee's books of account.”

Briefly stated facts are that the assessee engaged in the business of trading, manufacturing, export and servicing in cutting tools. The AO received information from DGIT (Investigation), who in turn received information from Sales Tax Department, Mumbai that the assessee has made purchases from hawala parties, as listed in hawala dealers by the Maharashtra Sales Tax Department, Mumbai who are providing bogus bills of purchase amounting to Rs. 1,11,22,370/- as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: - Sr. Hawala Biller Name Amount No.

M/s Ansa Sales Agency Rs. 51,41,659 2. M/s Bhavi Sales Agency Pvt. Ltd Rs. 59,80,611 Total Rs. 1,11,22,370

The AO issued noticed under section 133(6) to the parties which returned back with the remark as “left” and assessee failed to produce these parties. During the course of assessment proceedings and during appellate proceedings, the assessee submitted all the documentary evidences such as inward register, stock register, 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 Rs. 1,11,22,370/- to the return income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who restricted the disallowance at 12.5% of the bogus purchases by observing as under: - “As narrated earlier, the ld. A.O. in this case has held that the parties from which the purchases were made by the appellant were found to be bogus and that is the reason for which it was not produced during the assessment proceedings. Not having doubted the consumption/ sales, the motive behind obtaining bogus bills thus, appears to be inflation of purchase price so as to suppress true profits. Considering the facts of the case as well as the various case laws cited (supra), I estimate the suppressed profit to the extent of 12.5% of the purchases made from the bogus entities, as the suppressed profit element embedded in such purchases. This estimation is in addition to the GP shown by the appellant. Accordingly, this ground of appeal is partly allowed."

In the result, the appeal of Revenue is dismissed. Order pronounced in the open court on 24-08-2018. AadoSa kI GaaoYaNaa Kulao mao idnaMk 24-08-2018 kao kI ga[- .