SHRI RAMESH MANSHANKAR JOSHI,MUMBAI vs. INCOME TAX OFFICER WARD 30(3)(1), MUMBAI

Ramesh Manshankar Joshi Assessment Year: 2009-10 confirmation of certain additions on account of alleged bogus purchases. The assessment for impugned AY was framed by Ld. Income Tax Officer Ward 30(3)(1), Mumbai [AO] u/s 143(3) read with section 147 of the Income Tax Act,1961 on 27/02/2015 wherein the income of the assessee has been determined at Rs.10.55 Lacs after certain additions as against returned income of Rs.1.99 Lacs e-filed by the assessee on 16/09/2009. The subject matter of this appeal is addition on account of alleged bogus purchases and adhoc expenditure disallowance. The original return filed by the assessee was processed u/s 143(1). 2.1 Facts leading to the same are that the assessee being resident individual engaged in trading of Steel shots and Girth and scraps under proprietorship concern namely Gayatri Steel Corporation was subjected to reassessment proceedings for impugned AY.The reassessment proceedings were initiated pursuant to receipt of certain information from Sales Tax Department and DGIT (investigation) regarding dealers indulging in bogus purchase bills without doing any actual business and it was noted that the assessee stood beneficiary of such bogus purchase bills to the tune of Rs.55,26,126/- from six such parties. Consequently, statutory notice u/s 148 dated 21/02/2014 was issued to the assessee which was followed by notices u/s 143(2) and 142(1). 2.2 The assessee in support of the transactions, submitted purchase details as per his own books of accounts. However, notices u/s 133(6) issued by Ld. AO to confirm the transactions remained un-served and Ramesh Manshankar Joshi Assessment Year: 2009-10 returned back by the postal authorities with the remarks unclaimed / not known. Finally, not convinced, Ld. AO, relying upon certain judicial pronouncements, estimated the additions @15% of alleged bogus purchases, which came to Rs.8.28 Lacs. The Ld. AO made another adhoc disallowance @10% against certain expenses debited in the profit and loss account which came to Rs. 27,412/-. Aggrieved, the stand of Ld. AO, upon confirmation by Ld. CIT (A), is being contested before us. The assessee-in- person pleaded for reasonable estimation whereas Ld. DR pointed out that the impugned additions were quite reasonable.

We have carefully 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 actual material since the assessee was engaged in trading activity. The sales turnover achieved by the assessee has not been disputed by the revenue. The assessee was in possession of primary purchase documents. At the same time, the assessee could not produce any party for confirmation of the account and notices sent u/s 133(6) elicited no response. All these factors cast 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 earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which lower authorities have rightly done so. However, keeping in view the factual matrix, we find the estimated rate of 15% to be on the Ramesh Manshankar Joshi Assessment Year: 2009-10 higher side and therefore we reduce the same to 10%, which comes to Rs.5,52,613/-. The order of lower authorities stand modified to that extent. The adhoc expenditure disallowance is quite reasonable and therefore, the same do not require any interference on our part. 4. Resultantly, the assessee’s appeal stand partly allowed in terms of our above order.