JAYESH A SHAH,THANE vs. ITO WD 4(2), THANE

Since, the grounds raised

In the facts and circumstances of the case and in law, the Ld AO erred in disallowing Rs. 98,280/- out of purchases by way of unexplained expenditure u/s 69C, without issuing notices u/s 133(6) to the suppliers the CIT (A) erred in confirming Rs. 98,280/- out of the same, being ad-hoc 100% of the said purchases.

In the facts and circumstances of the case and in law, the Ld AO erred in disallowing Rs. 98,280/- out of purchases by way of unexplained expenditure u/s 69C and thereby overlooking the judgment of Bombay High Court in the case of Nikunj Eximp Enterprises Pvt Ltd (216 taxman 171 (Bom)) and the CIT (A) erred in confirming Rs. 98,280/- out of the same, being ad-hoc 100% of the said purchases. 5. In the facts and circumstances of the case and in law, the Ld AO erred in disallowing Rs. 98,280/- out of purchases by way of unexplained expenditure u/s 69C, even though the powers u/s 131 of the Act are with the AO and not with the appellant and therefore, the appellant cannot be made responsible for non-attendance by the suppliers and the Cit (a) erred in confirming Rs. 98,280/- out of the same, being ad-hoc 100% of the said purchases. 6. In the facts and the circumstances of the case and in law, the Ld AO erred in disallowing Rs. 98,280/- out of purchases by way of unexplained expenditure u/s 69C, even though the payment for purchases is made from the books and cannot be termed as unexplained expenditure and the CIT (A) erred in confirming Rs. 98,280/- out of the same, being ad-hoc 100% of the said purchases. 7. In the facts and circumstances of the case and in law, the Ld AO erred in disallowing 98,280/- out of purchases by way of unexplained expenditure u/s 69C without allowing cross examination of the said suppliers and the CIT (A) in confirming Rs. 98,280/- out of the same, being ad-hoc 100% of the said purchases. 8) In the facts and the circumstances of the case and in law, the Ld AO erred in disallowing Rs. 98,280/- out of purchases by way of unexplained expenditure u/s 69C only on the basis of the information on the website www.mahavat.gov.in about the suspicious dealers whose copy of statement recorded were not furnished to the appellant and the CIT (A) erred in confirming Rs. 98,280/- out of the same, being adhoc 100% of the said purchases.” 3. At the outset, Ld Counsel for the assessee submitted that this is a case of „bogus purchases‟ where the Assessing Officer invoked the provisions of section 69C of the Act and made entire addition of such bogus purchases. Matter travelled to the FAA and the CIT (A) confirmed the addition made by the AO without following the judgment of the Hon‟ble jurisdictional High Court in the case of Nikunj Eximp Enterprises Pvt Ltd (216 taxman 171 (Bom)) as well as the judgment of the Hon‟ble Gujarat High Court judgment in the case of CIT vs. Simit P Sheth [2013] (356 ITR 451) (Guj.). 4. During the proceedings before the Tribunal, referring to all the three appeals, ld Counsel for the assessee submitted that the disallowance may be restricted to the GP addition of the assessee on the said bogus purchases. Referring to VAT related payments, Ld Counsel for the assessee submitted that the assessee has paid the VAT allowing with the penalty in separate proceedings. Therefore, the VAT claim need not be considered while restricting the disallowance.

After hearing the Ld Representatives of both the parties and on perusal of the orders of the Revenue Authorities as well as the relevant material placed before the Tribunal, I find, the claim of the assessee should be allowed. Further, it is a settled principle that the addition of entire purchases is not sustainable as per the the jurisdictional High Court judgment in the case of CIT vs. Nikunj Eximp Enterprises [2015] (372 ITR 0619) (Bom). Considering the above as well as keeping in view the factual matrix of the case, I direct the AO to restrict the disallowance @ GP rates of the assessee and not to the entire purchases of the assessee. Accordingly I order. However, AO is directed to examine the claim of the assessee with regard to the VAT and the VAT component need not be disallowed if the same is found paid by the assessee in respect of the said purchases. AO shall grant a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. Thus, the grounds raised