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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI G.S. PANNU
O R D E R PER G.S. PANNU, AM :
The captioned appeal by the assessee is directed against the order of CIT(A)-45, Mumbai dated 02.02.2017, pertaining to the Assessment Year 2009-10, which in turn has arisen from the order passed by the Assessing Officer, Mumbai dated 31.03.2015 under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short ‘the Act’).
In this appeal, assessee has raised the following two Grounds of appeal :-
“1. On the facts and in law, the Ld. CIT(A) erred in not deleting entire addition of Rs.20,59,543/- out of purchases of Rs.73,50,263/- made by the Assessee from alleged non-genuine dealers and restricting the addition to 12.50% which works out to Rs.9,18,783.
2. Without prejudice, Ld. CIT(A) failed to appreciate that AO had invoked section 145(3) and estimated GP without giving any comparable and further erred in making addition without subtracting declared GP from the estimated GP.”
In brief, the relevant facts are that the assessee is an individual in whose case assessment for the Assessment Year 2009-10 was reopened by issuing a notice u/s 148 of the Act dated 07.03.2014 on the basis of information received from the Sales Tax authority of Maharashtra stating that assessee had effected purchases from certain parties who were found to be hawala dealers and, therefore, as per the Assessing Officer the purchases were bogus and thus, income chargeable to tax had escaped assessment. In the ensuing assessment, it was noticed that out of total purchases of Rs.91,50,008/-, purchases to the tune of Rs.73,50,263/- were made from eleven parties who were found to be hawala dealers. The relevant discussion in the assessment order reveals that the Assessing Officer carried a verification exercise on the basis of which it was inferred that the assessee was not able to provide relevant corroborative evidence or material to support the purchases. The Assessing Officer further treated the bogus/unverifiability of purchases as a defect so as to invoke the provisions of Sec. 145(3) of the Act thereby treating the account books as unreliable. The Assessing Officer thereafter estimated the “possible profit” on the purchases made through non-genuine parties @ 28.02% of the unverifiable purchases of Rs.73,50,263/-, which resulted in an addition of Rs.20,59,543/-. The assessee carried the matter in appeal before the CIT(A) by making various submissions reiterating the genuineness of the purchases. The CIT(A) upheld the stand of the Assessing Officer in principle, but restricted the addition to 12.5% of the unverifiable purchases of Rs.73,50,263/-, which came to Rs.9,18,783/- and deleted the balance. Not being satisfied with the order of the CIT(A), assessee is in further appeal before us.
Before me, the appellant has canvassed that the CIT(A) ought to have deleted the entire addition, and that the profit was estimated by the Assessing Officer after invoking Sec. 145(3) of the Act without giving any comparables.
On the other hand, the ld. DR has placed reliance on the orders of the authorities below.
Having considered the rival stands, a pertinent plea which emerges is that so far as the rejection of the book results by the Assessing Officer is concerned, the same cannot be now disputed by the assessee. In this context, in para 10 of the assessment order, the Assessing Officer has specifically recorded that invoking of Sec. 145(3) of the Act was agreed upon by the assessee’s representative vide order sheet noting dated 27.06.2014. In this background, in my view, the CIT(A) was quite justified in estimating the addition on the basis of 12.5% of the unverifiable purchases, an action which is in consonance with a similar situation dealt with by the Hon'ble Gujarat High Court in the case of Simit P. Sheth, 356 ITR 451 (Gujarat). Therefore, I find no reason to interfere with the decision of the CIT(A) on this aspect. In the result, assessee fails in its appeal.
Resultantly, appeal of the assessee is dismissed.
Order pronounced in the open court on 13th October, 2017.