DHIRAJLAL SOMAIYA,MUMBAI vs. INCOME TAX OFFICER, WARD 33(1)(4), MUMBAI

The present appeal has been preferred by the assessee against the order dated 17.08.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.

The brief facts of the case are that the assessee is an individual engaged in business of steel hardware and general items. During the year the Assessing Officer (hereinafter referred to as the AO) found that assessee had made bogus purchases from following parties: Sr. Name of the party Amount of No. Purchase (Rs)

Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has dismissed the claim by observing as under: “5. I have considered the stand of the AO and the submissions of the appellant. The AO had received information from DGJT(Inv.), Mumbai/Sales Tax Department that the appellant made purchases to the tune of Rs.73,00,035/- from four concerns which were hawala dealers. Accordingly, the AO issued notice u/s 148 and reopened the assessment, making addition of Rs.9,12,504/- being 12.5% of the unproved purchases. The appellant stated that he had paid the amount to the aforesaid concerns throughbanking channel and had maintained stock registers and also all the details called for were supplied to the AO. Therefore, no addition cannot made on this account. The AO has relied upon the Gujarat High Court's decision reported in 356 ITR 290 in the case of Simit P. Sheth wherein it has been held that in case of bogus purchases, the estimation of profit at 12.5% can be made. Following the decision of Gujarat High Court's cited supra, the AO has correctly estimated the income at Rs.9,12,504/- being 12.5% of the bogus purchases and added the same to the total income of the appellant. I find no error in the estimation of income made by the AO and therefore, upheld the disallowance made by the AO. Accordingly, this ground of appeal is dismissed.”

During the course of hearing, the Ld. A.R. submitted that similar issue had come up before the Tribunal in the case of Hiralal Chunilal Jain & Ors. vs. ITO & Ors. in 2545, 1275/M/2014 wherein the Tribunal held that when Assessing Officer had not made any independent enquiry and simply made the addition on the basis of the information received from Sales Tax Department, then the addition is not justified. Hence, the same is squarely applicable in this case also.

We have heard the rival contentions of both the parties and found that similar issue had come up before the Tribunal in the case of Hiralal Chunilal Jain & Ors. vs. ITO & Ors. in 2545, 1275/M/2014 wherein the Tribunal has decided the appeal in favour of the assessee. Looking to the facts and circumstances of the case we find that the assessee has already declared the GP. Hence, AO is directed to allow the credit of GP declared by the assessee and deduct the same from 12.5% and estimate the GP @ 8% of total bogus purchases which comes to Rs.5,84,003/-

In the result, appeal of the assessee is partly allowed.