SANJAY POPATLAL BEDMUTHA,,MANMAD vs. INCOME-TAX OFFICER ,,

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This is the appeal filed by the assessee against the order of CIT(A)-1, Nashik, dated 22-08-2016 for the Assessment Year 2011-12.

“1. On the basis of facts and in the circumstances of the case and as per law, the Commissioner of Income Tax, (Appeals)-I, Nashik, is not justified in confirming validity of notice issued u/s.148 particularly when AO has issued the said notice on the basis of information received from third party and without application of mind. 2. On the basis of facts and in the circumstances of the case and as per law, the Commissioner of Income Tax, (Appeals)-I, Nashik, is not justified in confirming disallowance of purchases of Rs.5,55,152/- by treating the same as fictitious particularly when the said purchases are supported by purchase bills, transportation receipts, bank account statements for payments through banking channel, quantity account and more particularly when the CIT (A) is not justified in confirming the disallowances of purchases of Rs.5,55,152/- without considering the evidences. 3. On the basis of facts and in the circumstances of the case and in the interest of the justice the appeal may be set aside to the file of CIT (A) for re-adjudication. 4.The Appellant craves for addition to, deletion, alteration, modification, change any of the grounds.”

is engaged in the business of wholesale trading of Steel and Hardware

material. Assessee filed the return of income on 29-09-2011 declaring

total income of Rs.7,13,550/- for the assessment year under

consideration. On the basis of information received from the

Investigation Section of Sales Tax Department, AO issued notice

u/s.148 of the Act to the assessee. AO found that assessee made

purchases from couple of suppliers namely, Eleven Impex and Omkar

Trading Company amounting to Rs.5,55,152/-. Eventually, the AO

added entire bogus purchases to the total income of the assessee and

determined the income at Rs.12,68,702/-.

grounds relating to validity of reassessment proceedings. Contents of

Para No. 4 to 4.6 are relevant. Further, on merits, the CIT(A) upheld the

addition made by the AO by observing as under :

“5.2 The assessee did not produce the details sought by the Assessing Officer nor produce the parties for verification of purchases in front of the AO. The notice issued u/s.133(6) was returned back to the Assessing Officer stating that undelivered” in respect of Omkar Trading Company and “not known” in respect of Eleven Impex. In response to final opportunity granted by the Assessing Officer to prove the genuineness of impugned purchases, the assessee did not attend nor file any written submission. As the assessee could not produce any proof relating to movement of goods such as octroi receipts, transport receipts, inward and outward register etc. The AO held that the purchases are bogus and made an addition of R.5,55,192/- as bogus purchases.

5.3 It is observed from the assessment order that the assessee has neither complied to the notices issued by the Assessing Officer nor to the final show cause notice issued by him. The impugned purchase parties have neither been produced before the Assessing Officer nor before me. The appellant inspite of giving repeated opportunity both the Assessing Officer and me did not produce quantitative details of the goods purchases, nor co-related purchase and sales, nor produced proof for movement of goods, nor produced proof of payment to impugned purchases parties. In such circumstances, in my considered view the addition made by the Assessing Officer of Rs.5,55,142/- as bogus purchases is in order and is upheld.”

present appeal before the Tribunal with the grounds extracted above.

submitted that the reassessment proceedings u/s.147 of the Act is

invalid since the same is invoked without having any incriminating

material. On merits, Ld. Counsel for the assessee submitted that

confirming the entire purchases made by the assessee for the

assessment years under consideration is unsustainable when the books

of accounts are not formally rejected u/s.145(3) of the Act. Ld. Counsel

submitted that when the assessee submitted a copy of invoice of Omkar

Trading Company with ledger accounts, extract of assessee’s current

account maintained with Union Bank of India and copy of stock

register, rejecting the entire purchases as bogus purposes is not

tenable. Therefore, Ld. Counsel submitted that in view of the plethora

of decisions of the Pune Bench of the Tribunal, the addition may be

restricted to 10% of the bogus purchases. Further, Ld. AR for the

assessee has placed reliance on the ratio laid down by the Pune Bench

of Tribunal in bunch of appeals with lead order in M/s. Chhabi

Electricals Pvt. Ltd. Vs. DCIT in ITA No.795/PUN/2014, relating to

assessment year 2010-11, order dated 28.04.2017 and pointed out that

at best 10% of GP rate may be applied on alleged bogus purchases.

and perused the orders of the Revenue and the decisions relied on by

the Ld. Counsel for the assessee. Regarding the issue relating to re-

assessment and its validity, I find on similar circumstances, the

Coordinate Bench of the Tribunal dismissed the arguments of the Ld

Counsel for the assessee by relying on the decision of Coordinate Bench

of the Tribunal in the case of Mr. Khan Afzalhussain Mohd. Saie Vs.

DCIT – ITA Nos. 2708 and 2709/PUN/2016, dated. For the sake of

completeness, I proceed to extract the relevant para of the order of

Tribunal and the same is extracted as under :

“9. The first issue raised by the assessee is against re-assessment proceedings initiated under section 147/148 of the Act. We find that the said issue is squarely covered against the assessee by the ratio laid down by Hon’ble Supreme Court in ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra) and referring to paras 4 and 5 of the appellate order, we uphold the same and dismiss the ground of appeal No.1 raised by the assessee.

Following the same parity of reasoning, the ground of appeal No.1

raised by the assessee on this issue is dismissed.

Regarding the issue of confirming of entire addition of bogus

purchases by the CIT(A), I find that similar issue of bogus purchases

has been decided by the Tribunal in series of decisions. I find the

Coordinate Bench of the Tribunal in the case of Mr. Khan Afzalhussain

Mohd. Saie (supra) has restricted the addition to 10% of such alleged

bogus purchases. I therefore find it to relevant to extract the findings

given by the Tribunal in Para No.11 of order of Tribunal here as under :

“11. Now, coming to the merits of addition. The issue raised in the present appeal is against bogus purchases. We have already adjudicated similar issue in series of decisions with lead order in M/s. Chhabi Electricals Pvt. Ltd. Vs. DCIT in ITA No.795/PUN/2014, relating to assessment year 2010-11, order dated 28.04.2017. The assessee in the first year i.e. assessment year 2009-10 has maintained quantitative details. In other words, it has the evidence of purchasing goods and its sales. In such circumstances, at best, higher gross profit rate can be applied. Following our decision in earlier orders, we hold that GP rate of 10% over and above GP declared by the assessee in its books of account, be applied to work out the additional income in the hands of assessee. The ground of appeal No.3 raised by the assessee is thus, partly allowed.”

Considering the same, I direct the Assessing Officer to make

addition in the hands of assessee by adopting GP rate at 10% of bogus

purchases declared by the assessee. Accordingly, Ground No. 2 raised

by the assessee is partly allowed.

specific arguments were raised by both the parties on these grounds.

Therefore, they are dismissed as general.

Order pronounced on this 23rd day of March, 2018.

Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER

पुणे / Pune; �दनांक Dated : 23rd March, 2018. Satish

आदेश क� आदेश क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Nashik 3. आयकर आयु� / The CIT-1, Nashik 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / 5. DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार

स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune