A. VARSHIT & CO.,MUMBAI vs. ITO 25(2)(1), MUMBAI

I have considered rival contentions and gone through the orders of the authorities below. The brief facts of the case are that the assessing officer received information from DIT(Inv) and Sales-tax Department that the appellant had taken bogus purchase entries of Rs. 16,16,268/- from two parties namely M/s Sun Diam and M/s Vatrag Jewels. Accordingly the AO initiated proceedings u/s 147 by issuing notices u/s 148. Subsequently notices u/s 143(2) and 142(1) were also issued and served on the assessee. The assessee is a firm engaged in the business of Diamond Trading. The AO issued notices u/s 133(6) to the two parties from whom the appellant had made purchases to verify the genuineness of purchase transactions, however no reply was furnished by the said parties. Accordingly, AO added entire amount of purchase in assessee’s income.

By the impugned order, CIT(A) confirmed the action of the AO and assessee is in further appeal before us.

So far as reopening is concerned, we are satisfied that after recording reasons for reopening, the AO has issued notice u/s.148. Thus, there is no infirmity in the order of CIT(A) for upholding the reopening.

Now, coming to the merit of the addition, we found that allegation of the AO was as per information from the Sales Tax Department, assessee has taken accommodation purchases. However, the corresponding sales have not been denied by the AO. Without purchases there cannot be A. Varshit & Co., sale. Therefore, adding entire amount of purchases in assessee’s income is not justified. 8. Keeping in view the totality of facts and circumstances of the case, vis- à-vis nature of assessee’s business, I restrict addition to the extent of 12.5% of such bogus purchases. 9. In the result, appeal of the assessee is allowed in part.