NAGINBHAI KHIMJI CHOUDHARY,MUMBAI vs. INCOME TAX OFFICER 10(2)(4), MUMBAI

The only issue in these appeals of assessee is against the order of CIT(A) confirming the addition made by AO applying the profit rate at 12.5% of the bogus purchase. For this assessee has raised identically worded grounds in both the years except the quantum. The facts and circumstances are exactly identical in both the years and hence, we will take the facts from AY 2009-10 and will decide the issue.

Briefly stated facts are that the assessee engaged in the business of dealer in ferrous and non-ferrous metals. 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 who are providing bogus bills of purchase amounting to Rs. 22,49,142/- for AY 2009-10 & ₹ 3,80,90,771/-for AY 2010-11 as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: - 2009-10 Name of party Amount Payal Enterprises 2,43,048/- Bhumi Enterprises 1,76,280/- KK Trading Co. 24,938/- Arihant Trading Co. 2,83,764/- Sunshine Metal Industries 4,23,155/- Apollo Metals 4,79,123/- Poornima Trading Co. 6,18,834/- ITAs no.4317 & 4318/Mum/2018 22,49,142/- 2010-11 Name of party Amount Registhan Metal IIndia) 21,715/- Gold Star Trading Co. 3,45,748/- Arihant Trading Company 4,73,414 Vasant Impex Private Limite 13,97,419 Apollo Metals 16,52,475 38,80,771/- 4. The AO issued noticed under section 133(6) to the parties which returned back with remark as ‘not known’ and assessee failed to produce these parties. During the course of assessment proceedings and during appellate proceedings, the assessee submitted documentary evidences such as 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 12.5% of ₹ 2,81,143/- for AY 2009-10 & ₹ 4,86,346/- for AY 2010-11 to the returned income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who confirmed the addition made by the AO by observing in para 6.2 by following the decision of Hon’ble Gujarat High court in the case of CIT vs. Smith P. Seth (2013) 356 ITR 451 (Guj) by observing as under: - “6.2 In this back drop of addition made by the AO and also various submission placed by the appellant, I do not find any valid reason to interfere with the addition @ 12.5% of the alleged bogus purchases, and the addition made by the AO on this issue is upheld. All the above grounds are on the issue of this addition only, therefore, 4 ITAs no.4317 & 4318/Mum/2018 all the above grounds are treated as disposed off and dismissed.”