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Appellant by : None Respondent by : Shri S.K. Bepair (Sr. DR) Date of Hearing : 07.08.2018 Date of Pronouncement : 07.08.2018 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order of ld. Commissioner of Income-tax (Appeals)-30, Mumbai [ld. CIT(A)] dated 24.02.2017 for Assessment Year 2009-10. The assessee has raised the following grounds of appeal:
1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeal) erred in (a) confirming addition to the extent of Rs. 1070650/- (6.50%) out of alleged bogus purchases of Rs.16471551/- (b) estimating rate of profit at 6.50% on alleged bogus purchases over and above gross profit declared of 5.0% by the appellant on such purchases and thereby confirming further addition of Rs. 1070650/- to the total income of the appellant. Reasons assigned by him are wrong and insufficient to justify addition of Rs. 1070650/- @ 6.50% of alleged bogus purchases of Rs. 16471551/-.
2. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) failed to appreciate that (a) Proceeding initiated under section 147/ 148 of the Act is on the basis of reason to suspect and not on reason to believe.
Mum 2017 - Ms Sanghvi Metals (b) There is no new tangible material in possession of the Assessing Officer which justify issuance of notice u/s 148 of the Act (c) The initiation of proceeding under section 147 of the Act and issuance of notice under section 148 is bad in law and contrary to the provisions of the Act and liable to be cancelled/ annulled 3. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in confirming order made under section 143(3) rws 147 of the Act by the learned Assessing Officer which is illegal, bad-in-law, ultra vires and without allowing reasonable opportunity of the hearing, without appreciating the facts, submission and evidences in their proper perspective, without providing copies of material used against the appellant and without providing cross examination, same is liable to be annulled.
4. The learned assessing officer erred in charging interest under section 234A, 2348, 234C and 2340 of the Act.
Brief facts of the case are that the assessee-firm is a Trader in Ferrous and Non-Ferrous Metals, filed its return of income for Assessment Year 2009-10 on 12.09.2009 declaring total income of Rs. 2,97,576/-. The return was processed under section 143(1). Subsequently, the assessment was re-opened on the basis of information received from DGIT (Investigation), Mumbai.
The assessing officer received the information that the assessee is one of the beneficiaries, who has availed bogus entry from hawala trader. On the basis of information from Sales Tax Department the assessment was re-opened.
During the re-assessment proceedings the Assessing Officer noted that the assessee has shown purchases of Rs. 1,64,71,551/- from 16 such hawala dealers. The re-assessment was completed on 19.03.2015 under section 143(3) rws 147 of the Act. The Assessing Officer while passing the assessment order made the addition of 12.5% on account of non-genuine purchases as profit element embedded in such tainted purchase. On appeal 2 Mum 2017 - Ms Sanghvi Metals before the ld. CIT(A), the re-opening was sustained. However, the addition on account of bogus purchases was restricted to 6.5%. Therefore, further aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us.
None appeared on behalf of assessee despite service of notice through RPAD.
Perusal of records reveals that none appeared on behalf of assessee even on 03.07.2018. Before 03.07.2018, the appeal was taken up on 25.06.2018 and the ld. AR for the assessee seeks adjournment and on his request the appeal was fixed on 03.07.2018. Therefore, we left no option except to hear the ld. Departmental Representative (DR) for the Revenue and to decide the appeal on the basis of material available on record.
Ground No.1 relates to restricting the addition of bogus purchases @ 6.5% of the total disputed/bogus purchases. The ld. DR for the revenue supported the order of the authorities below. On the other hand, the ld. DR for the revenue supported the order of authorities below. The DR further submits that the Sales Tax Department, Govt. of Maharashtra and the Investigation Wing of Income tax Department made full-fledged enquiry with regard to hawala dealers who were indulging in providing accommodation enteritis without delivery of goods. The assessee has shown purchases from such parties whose names appeared in the list of hawala dealers. The assessee merely obtained accommodation bills only to inflate expenses and bring out the Mum 2017 - Ms Sanghvi Metals profitability in order to avoid tax. The ld. DR further submits that AO has already given sufficient relief to the assessee.
We have considered the submission of ld. DR for the Revenue and have gone through the orders of authorities below. We have noted that assessee has shown the total purchases of Ferrous and Non-Ferrous items worth of Rs. 1,64,71,551/- from 16 parties. The names of all 16 parties were shown in the list of bogus hawala dealers. During the re-assessment, the Assessing Officer asked the assessee to substantiate the genuineness of purchases and corresponding sales of the goods/material. The assessee filed his written submission dated 12.02.2015 and 03.03.2015. Along with written submission, the assessee furnished complete details of purchases which consist of sales bill, voucher, stock register and register and entry and exit. The reply of the assessee was not accepted by Assessing Officer after considering the submission of the assessee and disallowed 12.5% of the purchases holding that only profit element embedded in such purchases is liable to disallowed.
The Assessing Officer has not examined the Gross Profit declared by assessee in earlier year or in subsequent Assessment Year. The ld. CIT(A) sustained the addition/disallowance of non-genuine purchases to the extent of 6.5 % of the purchases shown from hawala dealers. After considering the Gross Profit declared by assessee. The assessee has declared Gross Profit @ 5% for the year under consideration. We have noted that the order passed by ld. CIT(A) in sustaining the addition @ 6.5% is quite reasonable. No contrary 4 Mum 2017 - Ms Sanghvi Metals fact or evidence is brought to our notice to take any contrary view, therefore, we affirmed the order of ld. CIT(A). In the result, ground no. 1 of the appeal is dismissed.
Ground No.2 &3 relates to validity of re-opening. The ld. DR for the Revenue supported the order of lower authority. The ld. DR for the Revenue further submits that there was specific information from DGIT (Investigation) that assessee is one of the beneficiaries of persons who have availed bogus entries from hawala dealers. The Assessing Officer has sufficient reason for making believe that the income has escaped from assessment.
We have considered the submission of ld. DR for the Revenue and we are in agreement with the submission of ld. DR that the Assessing Officer was having sufficient reason for making his belief that income of assessee has escaped from assessment. Therefore, we do not find any reason to interfere with the finding of lower authority. Hence, ground no. 2 & 3 are dismissed.
Ground No.4 relates to charging of interest under section 234A, 234B, 234C & 234D. This ground of appeal
is consequential in nature and need no adjudication.
9. In the result, appeal of the assessee is dismissed.