SHIVAJI VELJI VAVIA,MUMBAI vs. ITO WD 26(3)(2), MUMBAI

The assessee is a trader in stationery and allied items. Consequent to the information received from Sales tax department that certain traders are indulging in providing accommodation bills without actually supplying materials and upon noticing that the assessee has purchased materials from seven of such dealers aggregating to Rs.51,41,322/-, the AO reopened the assessment. The assessing officer issued notices u/s 133(6) of the Act, but most of them were returned unserved. The authorized representative agreed for addition of purchases made from M/s Siddhi Vinayak Corporation amounting to Rs.5,85,000/- and from M/s Blue Nile Enterprises amounting to Rs.6,05,864/-. Accordingly the AO disallowed entire amount of purchases made from the above said two parties. In respect of purchases made from remaining parties, the AO

The ld A.R submitted that the authorized representative, who appeared before the AO, had agreed for 100% of the addition of purchases made from M/s Siddhi Vinayak Corporation and M/s Blue Nile Enterprises without consulting the assessee. He further submitted that the assessee is dealing in numerous items of stationery and hence he could not maintain day to day stock register. He submitted that the assessee has already declared G.P @ 7.2% and hence the disallowance of entire amount of purchases is not correct Accordingly he submitted that the addition of 12.50% made by the AO was also very much higher.

On the contrary, the Ld D.R submitted that the assessee has agreed for addition of purchases made from two parties and hence the same cannot be challenged at this stage. With regard to the remaining amount of addition, the ld D.R submitted that the AO was justified in making addition at 12.50%.

I have heard rival contentions and perused the record. Since the authorized representative, who appeared before the AO, has agreed for addition of entire amount of purchases made from the two parties, referred above, and since the assessee has failed to furnish any material, either in the form of confirmation from the above said parties or in any other manner, to show that the purchases made from those two parties were genuine which would render the acceptance of the AR as against the facts, I have no other option but to confirm the disallowance of purchases made from the two parties referred above.

With regard to the remaining amount of addition, I notice that the assessee has been dealing in numerous items of stationery and he has declared G.P of 7.2%. Under these set of facts, the addition made @ 12.50% appears to be on the higher side. Accordingly I am of the view that the addition may be sustained at 6% of the value of remaining purchases and the same would put this issue to rest. Accordingly I set aside the order passed by Ld CIT(A) in respect of remaining amount of addition and direct the AO to sustain addition to the extent of 6% of the remaining amount of purchases. I order accordingly.

In the result, the appeal of the assessee is partly allowed. Order has been pronounced in the Court on 18.9.2017.