LAXMIKANT RAMNIWAS BALDAWA,,LATUR vs. INCOME-TAX OFFICER,,

The assessee has raised the following grounds of appeal:-

Despite service of notice, none appeared on behalf of the assessee nor any application was moved for adjournment. The perusal of records reflect that the issue raised in the present appeal is against estimation of GP on bogus purchases. The issue is covered by the orders of Pune Bench of Tribunal. Hence, the appeal is decided after hearing the learned Departmental Representative for the Revenue.

Briefly, in the facts of the case, the Assessing Officer had received information from the Sales Tax Department in respect of Hawala operators. The assessee had made purchases from the said parties to the tune of ₹ 46,94,694/-. The assessee was trader of M S Wire. The assessee was asked to furnish the details in respect of aforesaid purchases. The Assessing Officer made certain enquiries. However, the Hawala parties did not respond. The case of assessee before the Assessing Officer was that it had purchased material from the above parties, against which the payments were made through cheques / demand drafts from ICICI bank. The assessee also furnished the copy of Inward & Outward Register, Diesel bill for expenses, VAT paid challan on these purchases, where the seller had not paid the same. The assessee claimed that the goods were transported by his own vehicle. The assessee stressed that actual purchases were made and the Assessing Officer on verification of copy of Inward & Outward Register noticed that the assessee had shown the material purchased from the above parties and also the sales of material. However, as per the Assessing Officer, no other evidence regarding transportation of material had been filed. Therefore, he was of the view that purchases could not be said to be made from the above parties. Relying on the decision of the Hon’ble High Court of Gujarat in CIT Vs. Simit P. Sheth in Tax Appeal No.553 of 2012, wherein higher GP rate was adopted, the Assessing Officer held that since the facts of instant case were similar, then the profit @ 12.5% of disputed purchases is to be estimated and hence, the addition of ₹ 5,86,837/-.

The CIT(A) referred to different decisions, wherein 25% to 100% disallowance of bogus purchases had been upheld. The CIT(A) was of the view that percentage of disallowance of bogus purchases had to be based on facts of each case. The CIT(A) was of the view that where the assessee had failed to prove the genuineness of purchases made by it and further where that the Assessing Officer had held that assessee had actually purchased the material in cash from open market and only bills were taken from Hawala party, the explanation of assessee was not accepted. The CIT(A) also acknowledges that purchase amount had been paid to the alleged supplier through banking channel. He thus, concluded by holding that it was a case where at most purchase expenses might have been inflated. The CIT(A) thus, upheld the order of Assessing Officer, against which the assessee is in appeal.

The issue arising in the present appeal is squarely covered by the decision of Pune Bench of Tribunal in bunch of appeals 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, wherein it was directed to apply GP rate of 10% on the goods purchased, over and above the GP rate declared by the assessee. The Assessing Officer and CIT(A) in this regard had made addition by adopting GP rate of 12.5% on bogus purchases. However, the same is restricted to 10% of GP rate on bogus purchases over and above the GP rate declared by the assessee.

The assessee has also raised the issue of jurisdiction of Assessing Officer under section 147 r.w.s. 144 of the Act and also failure of Assessing Officer to issue mandatory notice under section 143(2) of the Act. However, this ground of appeal raised by the assessee is dismissed as in the case of

In the result, appeal of assessee is partly allowed.