ITO 29(3)(1), MUMBAI vs. RAVINDRA HASTIMAL JAIN, MUMBAI

This appeal filed by the Revenue on 07.06.2016 is against the order of the CIT (A)-40, Mumbai dated 2.3.2016 for the assessment year 2011-2012.

In this appeal, Revenue raised four grounds in toto and they revolve around the solitary issue relating to the addition on account of „bogus purchases‟. During the assessment proceedings, AO found the purchases amounting to Rs. 43,25,288/- from three parties viz (i) Kamal Trading Corporation (Rs. 10,16,157/-); (ii) Jayni Trading Company (Rs. 9,45,480/-) and (iii) Shreeji Enterprise (Rs. 23,38,351/-) constitute „bogus purchases‟. Therefore, AO invoked the provisions of section 69C of the Act. Matter travelled to the first appellate authority. 3. During the proceedings before the first appellate authority, after examining the arguments and evidences available on record, CIT (A) noticed that the GP rates of the assessee over the AYs vary from 6.95%, 9.07% to 9.17%. Eventually, CIT (A) held that applying rate of 15% on the said „bogus purchases‟ constitutes a „reasonable and fair‟. Accordingly, CIT (A) restricted the addition to 15% of the said bogus purchases amounting to Rs. 43,25,288/-. Aggrieved with the above decision of the CIT (A), Revenue is in appeal before the Tribunal.

During the proceedings before the Tribunal, at the outset, Ld Counsel for the assessee brought our attention to the judgment of the Hon‟ble Gujarat High Court in the case of CIT vs. Simit P. Sheth, of 2012, dated 16.1.2013 read with the judgment of the Hon‟ble jurisdictional High Court in the case of Nickunj Eximp Enterprises Pvt Ltd vs. ACIT vide Writ petition No. 2860 of 2012, dated 18th June, 2014 wherein restricting the addition to the GP rate of 12.5% is approved.

On the other hand, Ld DR for the Revenue heavily relied on the order of the AO.

On hearing both the parties and on perusal of the orders of the Revenue Authorities as well as the cited precedents, I am of the opinion, the GP rate of 15% invoked by the CIT (A) is much higher than that of the 12.5% approved by the above cited precedents. Considering the above cited binding judgments (supra), I am of the opinion, there is no case for making entire bogus purchases as addition u/s 69C of the Act. Therefore, in my considered view, the decision of the on this issue CIT (A) vide para 7.3.1 of his order is fair and reasonable and it does not call for any interference. Accordingly, grounds raised