KHAN AFZALHUSAIN MOHD.SAIE,,NASHIK vs. DEPUTY COMMISSIONER OF INCOME TAX,,

The appeals of assessee were fixed for hearing but none appeared on behalf of assessee nor any application was moved for adjournment. However, we find that the issue raised in the present appeals stand covered by earlier orders of Tribunal on the said issue of bogus purchases. Accordingly, we proceed to decide the present appeals after hearing the learned Departmental Representative for the Revenue.

Both the appeals of assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience. In order to adjudicate the issues, reference is being made to the facts in ITA No.2708/PUN/2016, relating to assessment year 2009-10.

The assessee in ITA No.2708/PUN/2016, relating to assessment year 2009-10 has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law, the lower authorities have erred in initiating the reassessment proceedings u/s 147 in absence of any material showing any live link with the reason to believe that income has escaped the assessment. 2. On the facts and in the circumstances of the case and in law, the lower authorities have erred in passing the reassessment proceedings u/s 147, wherein no notice u/s 142(1) and 143(2) being served to assessee and no reasons to believe were provided to the assessee appellant. 3. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in estimating the Gross profit @ 20% for the assessment year especially in view of the fact that in principle it has been accepted that the purchases are genuine under such circumstances there is no need of any estimation of Gross Profit on alleged bogus purchase. Entire addition needs to be deleted.

The issue in grounds of appeal No.1 and 2 raised by the assessee is against re-assessment proceedings initiated under section 147 of the Act in the absence of any material showing any live link with the reason to believe that income has escaped the assessment.

Briefly, in the facts of the case, the Assessing Officer had received information from the Sales Tax Department that certain persons were involved in providing bogus bills to the beneficiaries. The assessee in this regard had received two bills totaling ₹ 44,07,780/-. The Assessing Officer thus, recorded reasons for reopening the assessment and initiated proceedings under section 147 / 148 of the Act.

The CIT(A) upheld the reopening of assessment in view of the ratio laid down by the Hon'ble Supreme Court in ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500 (SC). The CIT(A) also decided connected issue of assessee challenging service of notice under section 143(2) of the Act and after going through assessment records and the dispatch register, came to a finding that notice under section 143(2) of the Act was issued to the assessee and was sent by speed post. In view thereof, both these pleas of assessee were rejected. Coming to the merits of addition. The Assessing Officer had made addition on account of bogus purchases in the hands of assessee to the tune of ₹ 44,07,780/-. The CIT(A) however, noted that the assessee had maintained quantitative details in assessment year 2009-10 but in assessment year 2010- 11, the assessee had computed profit on gross profit method. The CIT(A) thus, restricted addition to 20% of purchases as additional gross profit for the year under appeal.

The assessee is in appeal before us on all the three issues.

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

Coming to the next ground of appeal raised by the assessee of non service of notice. The CIT(A) in paras 5 and 5.1 at pages 9 and 10 has gone through the assessment records and also dispatch register and verified not only the issue of notice under section 148 of the Act but also its dispatch on 09.10.2014. Notices were sent on 20.10.2014 as evident from speed post entries. Accordingly, there is no merit in the plea of assessee vis-à-vis non service of notice under section 143(2) of the Act.

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.

The facts and issues in ITA No.2709/PUN/2016 are identical to the facts and issues in ITA No.2708/PUN/2016 and our decision in ITA No.2708/PUN/2016 shall apply mutatis mutandis to ITA No.2709/PUN/2016.

In the result, both the appeals of assessee are partly allowed.