ALIASGAR F. MAGAR,MUMBAI vs. INCOME TAX OFFICER-20(1)(1), MUMBAI

The facts relating to the case are discussed in brief. The assessee is engaged in the business of manufacture of metal fabrics. 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.118.93 lakhs, the AO reopened the assessment of this year by issuing notice u/s 148 of the Act. The assessing officer took the view that the assessee has 2 Mr. Alisagar Fakhruddin Magar purchased goods from grey market and not from the hawala suppliers. Accordingly he estimated the profit from the impugned purchases at 12.50% of the value of purchases and added the same to the total income of the assessee. The Ld CIT(A) confirmed the validity of reopening of assessment. However he gave partial relief to the assessee by restricting the addition to 9.26%, being the rate of Gross Profit declared for the year under consideration. Still aggrieved, the assessee has filed this appeal.

The Ld A.R submitted that the reopening has been done on presumption basis and hence it is not valid. Further he submitted that the goods purchased from these parties have been sold/consumed, meaning thereby, the purchases cannot be in doubt. Accordingly he submitted that the entire addition should have been deleted by Ld CIT(A).

On the contrary, the Ld D.R placed reliance on the decision rendered by Ld CIT(A).

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.

There is no dispute with regard to the fact that the assessing officer has accepted the fact of purchase of materials, but he has doubted the source of purchases only. Hence the AO has taken the view that the assessee would have made profit from such purchases and accordingly he has estimated the profit element embedded in such purchases at 12.50% of the value of purchases. In my view, mere submission of purchase bills and payment details would not be 3 Mr. Alisagar Fakhruddin Magar sufficient, particularly when the suppliers have been declared as hawala dealers. I notice that the assessee has not obtained any confirmation letter from the suppliers nor he could produce them before the AO. Further the notices issued to the suppliers u/s 133(6) of the Act has been returned back unserved. Hence, in my view, it cannot be said that the assessee has proved the purchases beyond doubt. Under these set of facts, the AO was justified in estimating the profit element embedded in the purchases, which he has estimated at 12.50%. However, the Ld CIT(A) has restricted the same to the rate of gross profit declared by the assessee. In the absence of any other material, I do not find any reason to interfere with the view taken by Ld CIT(A). Accordingly I confirm the order passed by ld CIT(A).

In the result, the appeal of the assessee is dismissed. Order has been pronounced in the Court on 1.11.2017.