HARDIK JITENDRA SHAH,MUMBAI vs. INCOME TAX OFFICER-32(1)(5), MUMBAI

The facts relating to the case are discussed in brief. The assessee is engaged in the business of trading in Iron & Steel, Industrial products etc. He carries on the business in its proprietary concern named M/s Reena Enterprises. Consequent to the information received from the Sales tax department that certain parties are engaged in the business of providing accommodation bills without actually supplying the materials and upon noticing that the assessee has purchased goods from some of such parties in the year under consideration to the tune of Rs.77.88 lakhs, the AO reopened the assessment of this year by issuing notice u/s 148 of the Act. The assessing officer estimated the profit element embedded in the above said suspicious purchases at 30% of its value

I have heard rival contentions and perused the record. I notice that the assessing officer has reopened the assessment on the basis of information received from Sales tax department. Accordingly I am of the view that it cannot be said that the reopening was on presumption basis. Accordingly I uphold the validity of reopening of assessment.

With regard to the estimation of profit @ 12.50%, the Ld A.R submitted that the assessee agrees to the same in order to put an end to the litigation. However he submitted that the assessing officer has taken the purchases made from M/s R.K. Traders at Rs.23,94,503/-, where as the actual purchases made from the above said party as per the books of account was only Rs.10,60,992/-. Accordingly he submitted that the purchase value may be suitably reduced. I notice that the assessee has taken this plea before the AO and the assessing officer has already considered the same. However, since the assessee contends that the purchases recorded in the books of account was only Rs.10,60,992/-, I am of the view that the assessee may be given one more opportunity to substantiate his contentions before the AO.

Accordingly, I sustain the profit rate of 12.50% estimated by Ld CIT(A). However, there is dispute with regard to the quantum of purchases made from M/s R.K. Traders. Accordingly, the issue relating thereto is set aside to the file of the AO with the direction to examine the claim of the assessee and take appropriate decision in accordance with the law.

In the result, the appeal of the assessee is treated as partly allowed. Order has been pronounced in the Court on 2.11.2017.