MUBARAK HUSSAIN SHAIKH,MUMBAI vs. INCOME TAX OFFICER, WARD 26(2)(3), MUMBAI

Briefly stated the assessee being resident individual engaged in the business of manufacturing of washer under proprietorship concern namely Saba Engineering Works was subjected to reassessment proceedings pursuant to receipt of certain information from DGIT (Investigation) regarding dealers being indulging in bogus purchase bills. Pursuant to the said information, it was found that the assessee made purchases aggregating to Rs.84,04,487/- from eight such parties, the details of which have been extracted at para 5.1 of the quantum assessment order. The assessee while defending the purchases made by him, submitted documentary evidences viz. quantitative details, copies of invoices etc. and submitted that the payments to suppliers were made through banking channels. However, notices issued u/s 133(6) to these suppliers elicited no satisfactory responses and the assessee failed to produce these parties. Further, the assessee, in the opinion of Ld. AO, failed to substantiate the receipt of material. All these factors led the Ld. AO to conclude that the assessee procured bogus bills to accommodate goods purchased from the grey market. Finally, Ld. AO estimated the addition @25% against these purchases which came to Rs.21.01 Lacs and added the same to the income of the assessee.

ITA.No.645/Mum/2018 Mubarak Hussain Shaikh Assessment Year- 2010-11 3. Aggrieved, the assessee contested the same without any success before Ld. CIT(A) vide impugned order dated 30/06/2017 wherein the Ld. CIT(A), after considering the factual matrix and placing reliance on certain judicial pronouncements, confirmed the stand of Ld. AO against which the assessee is in further appeal before us.

The Ld. Authorized Representative for assessee, Shri Awadhesh Kumar, by way of written submissions, drew our attention to the Gross Profit / Net profit rates reflected by the assessee over several years. The attention was drawn to the fact that quantitative details of the stock were duly submitted by the assessee to the lower authorities and all the payment to the supplier was through banking channels. Our attention is further drawn to the fact that this Tribunal in assessee’s own case as well as in the case of other assessees has estimated the additions at lower rates. On the other hand, the Ld. Departmental Representative [DR], Ms.N.Hemalatha, submitted that the action of the lower authorities was fair and justified on factual matrix.

We have heard the rival contentions and perused relevant material on record. We are of the considered opinion that there could be no sale without purchase of material keeping in view the assessee’s nature of business. The turnover achieved by the assessee has not been disputed by the revenue and the payments were through banking channels. The assessee reconciled quantitative details also to certain extent. However, at the same time, the assessee failed to prove the purchases through requisite documentary evidences and also failed to produce the suppliers to confirm the transactions. Notices issued u/s 133(6) to all the suppliers elicited not even a single response. All these factors cast a ITA.No.645/Mum/2018 Mubarak Hussain Shaikh Assessment Year- 2010-11 serious doubt on assessee’s claim. Therefore, in such a situation, the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit element earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against alleged bogus purchases, which lower authorities have rightly done. However, keeping in view the consistent view of the Tribunal in estimating the additions in similar circumstances, we estimate the same @10% of alleged bogus purchases. Accordingly, the additions to be sustained by the assessee works out to Rs.8,40,045/-. The decision of Ld. CIT(A) stand modified to that extent.

Resultantly, the assessee’s appeal stands partly allowed in terms of our above order. Order pronounced in the open court on 23rd May, 2018 Sd/- Sd/- (Saktijit Dey) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांक Dated : 23. 05.2018 Sr.PS:- Thirumalesh ITA.No.645/Mum/2018 Mubarak Hussain Shaikh Assessment Year- 2010-11 आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent 2. 3. आयकर आयु�(अपील) / The CIT(A) आयकर आयु� / CIT – concerned 4. 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard File