ITO 20(1)(4), MUMBAI vs. DILIP SUKHRAJ GOWANI, MUMBAI

The captioned appeal by revenue for Assessment Year [AY] 2009- 10 assails the order of the Ld. Commissioner of Income-Tax (Appeals)- 32 [CIT(A)], Mumbai, Appeal No. CIT(A)-32/IT-214/20(1)(4)/2015-16 Dilip Sukhraj Gowani Assessment Year 2009-10 dated 20/02/2017 qua relief provided to the assessee against certain alleged bogus purchases made by the assessee. 2.1 Facts leading to the same are that the assessee being resident individual engaged as dealer of ferrous and non-ferrous metal under proprietorship concern namely Dhwani Metals was subjected to an assessment u/s 143(3) read with Section 147 for impugned AY on 18/03/2015 where the income of the assessee was determined at Rs.2,74,01,900/- after certain additions on account of alleged bogus purchases for Rs.2,71,71,538/-. The original return was filed on 30/09/2009 at Rs.1,68,780/- which was processed u/s 143(1). The solitary issue involved in the appeal is addition of certain bogus purchases. 2.2 The reassessment proceedings were initiated upon receipt of certain information from Sales Tax Department, Maharashtra regarding dealers indulging in bogus purchase bills and it was noted that the assessee stood beneficiary of such bogus purchase bills to the tune of Rs.2,71,71,538/- from seventeen parties. Consequently, notice u/s 148 dated 28/02/2014 was issued to the assessee which was followed by statutory notices u/s 143(2) and 142(1). 2.3 Notices sent u/s 133(6) to these parties to confirm the transactions remained un-served which was confronted to the assessee. The assessee did not file any cogent material to substantiate the purchases and therefore, Ld. AO disallowed the entire purchases and added the same to the income of the assessee.

The Ld. Departmental Representative [DR] contended that the assessee miserably failed to prove the purchase transactions and therefore, Ld. CIT(A) erred in granting substantial relief to the assessee. Per Contra, the assessee-in-person pleaded for a reasonable stand in the matter.

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 material since the assessee was a trader. The sales turnover achieved by the assessee has not been disputed by the revenue and the payments were through banking channels. The purchases were backed by invoices. At the same time, the assessee could not produce any confirmation from the impugned suppliers and all notices sent u/s 133(6) remained un-served, which 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 element earned by assessee Dilip Sukhraj Gowani Assessment Year 2009-10 against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which Ld. CIT(A) has rightly done. However, keeping in view the overall circumstances & nature of assessee’s business, we find that the same to be on lower side and therefore, estimate the additions @5% of alleged bogus purchases of Rs.2,71,71,538/- which comes to Rs.13,58,577/-. The Ld. AO is directed to re-compute the income of the assessee in terms of our order.

Resultantly, the revenue’s appeal stands partly allowed. Order pronounced in the open court on 08th November, 2017.