TUSHAR A. SHAH (HUF),MUMBAI vs. ITO WARD - 20(3)(4), MUMBAI

The Learned CIT (A) has erred in confirming Rs.25,00,013/- being 4.8% of Rs.5,20,83,614/- being inflated purchases i.e. alleged bogus purchases as against the addition of Rs.65,10,451/- being 12.5% of Rs.5,20,83,614/made by the Learned Assessing Officer.Your Appellant submits that purchases are genuine and ought to be allowed in full.

Without prejudice to the above, the Appellant submits that 4.8% addition on purchases of Rs.5,20,83,614/- is excessive, unreasonable and ought to be reduced substantially.

Briefly stated, the facts of the case are that the Assessing Officer (AO) received information from the Sales Tax Department, Government of Maharashtra that the assesee had taken bogus purchase bills from the following hawala operators: Sr. No. Name of the Party Amount (Rs.) 1. Dharmesh Trading Co. 1,44,50,837/- 2. Pioneer Trading Corporation 20,925/- 3. J.B. Interlink 12,70,041/- 4. Jindal Steel Corporation 19,93,622/- 5. Bright Corporation 18,75,385/- 6. Yash Impex 1,66,03,561/- 7. Maruti Steel Traders 13,178/- 8. Kwality Enterprises 10,41,638/- 9. Om Enterprises 1,48,14,638/- Total 5,20,83,614/- The AO noted that the above parties had given their statements on oath that they had given only bills and no actual transaction had taken place between them and the assessee. In view of the above, the AO reopened the assessment after issuing notice u/s 148. The AO, during the course of assessment proceedings, issued notice u/s 133(6) to the above parties to verify the purchases. He found that the notices issued to them were returned by the postal authorities as ‘unserved’. Thereafter, the AO vide letter dated 13.03.2015 asked the assessee to produce the above parties along with their copy of income tax return, ledger account, bank statement and original PAN card. In response to it, the assessee filed a reply before the AO which has been extracted at para 7 of the assessment order. However, the AO was not convinced with said explanation of the assessee as no materials were received in respect of these purchases which could have been included in the closing stock. Therefore, the AO estimated the profit element @ 12.5% on the purchase amount of Rs.5,20,83,614/-. The disallowance made by the AO thus comes to Rs.65,10,451/-.

Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) took into account the facts that the assessee had already recorded a G.P. of 9.36% in his books and the sales had not been doubted. The assessee offered before the Ld. CIT(A) addition on average percentage of current year and subsequent year i.e. 4.8% (current year G.P. 3.65% + previous G.P. 5,94%). The Ld. CIT(A) was convinced with the above submission of the assessee and directed the AO to estimate profit @ 4.8% on the total alleged bogus purchases of Rs.5,20,83,614/- which works out to Rs.25,00,013/-. Thus the Ld. CIT(A) gave relief of the balance amount of Rs.40,10,438/- to the assessee. 5. We find that there is no compliance by the assessee before the Tribunal on the date fixed for hearing.