NARENDRA CHOUDHARY,MUMBAI vs. ITO 19(2)(4), MUMBAI

The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in applying the profit rate i.e. gross profit rate @ 12.5% on the bogus purchases. For this assessee has raised following ground No.1: -

I have heard the rival contentions and gone through the facts and circumstances of the case, I find that the assessee is engaged in the business of trading in ferrous and non-ferrous metal under the name & style of Narendra Choudhary A.Y:10-11 proprietorship concern M/s Paxal Steel. During the course of scrutiny proceedings, the assessee has submitted the list of purchase parties, sale parties and the Bank statement etc. for the period under consideration. The AO received information from DGIT (Investigation) Mumbai, who in turn received information from Sales Tax Department, Mumbai that the many of the suspicious dealers providing bogus invoices of purchase to various parties and providing accommodation entries in the form of issuing bogus sales/ purchase bills without supply of any goods. This fact was admitted by these suspicious dealers in their statements recorded / deposition / affidavits filed before the Sale Tax Authorities. The assessee is also indulging in bogus purchases and the details of such bogus purchases from the hawala parties is amounting to Rs.2,58,81,450/- and accordingly, AO added a sum of Rs. 32,35,181/- by estimating profit rate of 12.5%. Aggrieved, assessee preferred the appeal before CIT(A), who also confirmed the action of the AO by following the decision of Hon’ble Gujarat High Court in the case of CIT vs. Smith P Seth 365 ITR 451(Guj). Aggrieved, assessee is in second appeal before Tribunal.

I find from the records and arguments of both the sides that the assessee had made bogus purchase but the same is supported by copy of purchase ledger along with invoices, copy of sale ledger, the stock records, confirmation from the alleged bogus purchase parties and proof of payment of consideration in the shape of relevant book entries from the bank statement making payment by cheque. But the assessee failed to produce these parties or when inquiry was made these parties were not found at their respective address. Now, before me, the learned counsel for the assessee only made request that the assessee’s profit rate is 5% which has already been declared and he provided the details of net profit ratio and gross profit ratio for the preceding year as well as future year as under: -

In the result, the appeal of assessee is partly allowed. Order pronounced in the open court on 07-06-2017.