DEEPAK CHUNILAL BAJAJ,MUMBAI vs. ITO 2(1), KALYAN

The assessee is engaged in the business of trading in Lubricating oil and greases in his proprietary concern named M/s DNR Corporation. The revenue received information from Sales tax department that certain dealers have provided accommodation bills without actually supplying goods. On further examination, the revenue noticed that the assessee herein has purchased goods from some of the hawala dealers to the tune of Rs.11,46,830/- and Rs.12,13,209/- respectively during the years relevant to AY 2009-10 and 2011-

The assessee furnished the copies of bills and payment details to the AO. However, the AO noticed that the assessee did not maintain stock register and could not produce transport challans. Further notices issued by the AO u/s 133(6) were returned un-served. The ward Inspector also could not locate the parties. Accordingly the AO took the view that the assessee has failed to prove the genuineness of purchase transactions and accordingly disallowed the entire amount of purchases in both the years. The Ld CIT(A) noticed that the G.P rate declared by the assessee was almost consistent over the years. Accordingly he took the view that the assessee could not have sold the goods without purchasing them. Accordingly he took the view a part of purchases can be disallowed and accordingly disallowed 25% of the purchases made from the hawala dealers in both the years. Still aggrieved, the assessee has filed this appeal before the Tribunal.

I heard the parties and perused the record. I notice that the Ld CIT(A) has taken the view that the assessee could not have sold the goods without purchasing them. Even though the assessee did not produce the stock register, the Ld CIT(A) has taken the above said view on examining the rate of gross profit declared by the assessee over the years. At the time of hearing, the Ld A.R submitted that the rate of gross profit of 25% estimated by the Ld CIT(A) is very much on the higher side and accordingly prayed that the same may be reduced to 10%. On the contrary, the Ld D.R submitted that the rate of GP estimated by the Ld CIT(A) is reasonable one.

Having heard rival submissions, I am of the view that the rate of GP of 25% estimated by the assessee is on the higher side, since the assessee is a wholesale trader and in the wholesale trading, GP rate of 25% is unlikely. I notice that the addition is being sustained by the Tribunal in some of the cases @ 12.5%. Accordingly I am of the view that the G.P rate may be adopted at the 3 Deepak Chunilal Bajaj above said rate and the same would meet the ends of justice. Accordingly I modify the order passed by Ld CIT(A) in both the years and direct the AO to sustain the addition to the extent of 12.5% of the alleged bogus purchases. I order accordingly.

In the result, both the appeals filed by the assessee are partly allowed. Order has been pronounced in the Court on 4.5.2017.