SHRI BHURARAM VIRDAJI CHOUDHARY,MUMBAI vs. INCOME TAX OFFICER 19(1)(2), MUMBAI

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 16.10.2017 for Assessment Year 2009-10. The assessee has raised the following grounds of appeal:

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. 1,08,71,191/- from 10 such hawala dealers. The re-assessment was completed on 17.03.2015. 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 before the ld. CIT(A), the re-opening as well as the disallowance under section 69A on account of bogus purchases was sustained. Therefore, further aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us.

The ld. AR of the assessee submits that all purchases of the assessee are 2 Mum 2018-Shri Bhuraram Virdaji genuine one. The assessee has proved by sufficient evidence, the genuinity of purchases. The ld. AR of the assessee further submits that in assessee’s brother case on similar facts and on similar grounds of appeal

, the Tribunal has sustained the addition of impugned/bogus purchases @ 6.5% of the aggregate of similar purchases.

5. 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 profitability in order to avoid tax. The ld. DR further submits that AO has already given sufficient relief to the assessee.

6. We have considered the submission of the parties 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. 1,08,71,191/- from ten parties. The names of all ten 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 12.03.2015. Along with written submission, the assessee furnished complete 3 ITA No. 184 Mum 2018-Shri Bhuraram Virdaji 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. We have noted that Assessing Officer has not given any finding over the documentary evidence furnished by the assessee in respect of purchases and corresponding sales.

The Assessing Officer has not discussed anything about the contention as well as evidences furnished by assessee. 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 by following the decision of Hon’ble Gujarat High Court in case of CIT vs. Simit P. Sheth 356 ITR 451 (Guj.) on his observation, the only profit element embedded in such type of purchases.

8. We have heard the Ld. D.R., perused the orders of the lower authorities and the material available on record. We have given a thoughtful consideration to the facts of the case and are of the considered view that in the backdrop of the fact that the notices issued by the A.O to the aforementioned 13 parties were returned by the postal authorities with the remarks 'not known', 'left', etc., the very existence of the said parties came under serious doubts. We further find that it remains as a matter of fact that the assessee even otherwise had failed to substantiate the genuineness and veracity of the aforementioned purchase transactions on the basis of irrefutable documentary evidences, viz. delivery challans, transportation receipts, octroi receipts, receipt of weigh bridge for weighing of goods, excise gate pass, goods inward register maintained at godown/warehouse storage house etc., therefore, the A.O being of the considered view that the genuineness of the purchase transactions could not be verified, had thus rightly rejected the books of account of the assessee by invoking the provisions of Sec. 145(3) of the 'Act'. We find that after rejection of the books of account the CIT(A) had fairly restricted the addition in the hands of the assessee @ 6.5% of the total purchases aggregating to Rs. 3,61,50,427/ - which were claimed by the assessee to have been made from the aforementioned 13 parties. We are of the considered view that the adoption of the rate of 6.5% by the CIT(A) is well supported on the basis of the reasoning adopted by the Hon'ble High Court of Gujarat in the case of CIT Vs. Simit P. Sheth (2013) 38 Taxmann.com 385 (Guj). We are of the considered view that the CIT(A) on the basis of his aforesaid reasoning for restricting the disallowance/ addition to 6.5% of the total non-genuine purchases, had also taken due cognizance of the fact that in the case of the assessee for the immediate succeeding years, viz. A.Y. 2010-11 and A.Y. 2011-12 the addition was restricted by the first appellate authority to 6%. We are of the considered view that the CIT(A) in the present case had on the basis of a very well reasoned order restricted the addition in the hands of the assessee to 6.5% of the total purchases aggregating to Rs. 3,61,50,427/ - which were claimed by the assessee to have been made from the aforementioned 13 parties. We are persuaded to be in agreement with the view taken by the CIT(A), and finding no reason to dislodge the view taken by him, therefore, uphold his order.