MANISH M SHAH,BHIWANDI vs. ACIT CIR 1, KALYAN

Facts relating to the issue are that the assessee filed return of income on 14.9.2009 declaring total income of Rs.30,01,620/-. The assessee is engaged in the business of selling of steel bars, roads and angles on wholesale basis.The return of the assessee was processed under section 143(1) of the Act on 25.5.2011. The AO received information from the Sales Tax Department, Government of Maharashtra that during the year that during the year some persons have provided bogus bills to the some tax payers without doing any actual business and also filed affidavits before the Sales Tax Department confirming the acts committed by these parties in respect of bogus bills provided to the beneficiary of such bogus bills. The name of the assessee also appeared in the list of such persons who received bogus bills from the hawala operators and the names of these bills suppliers are (a) Prayan Trading Co. (b) M/s Vitrag Trading Co. and (c) Sampark Steels. The amounts of bogus bills taken from these parties in all were Rs.25,07,989/-. Thereafter, the AO issued notice under section 148 on 20.3.2013 which was served upon the assessee and compiled with by the assessee by filing reply dated 22.8.2013 requesting the AO for supplying copy of reasons for reopening of the assessment. Thereafter a notices u/s 143(2) and 142(1) were issued to the assessee to attend before the AO on 3.10.2013 alongwith questionnaire calling for certain information. In response to it, the assessee submitted that the return of income filed on 14.9.2009 be treated as return of income filed in response to notice u/s 148 of the Act. The copy of the reasons for reopening of the assessment was also supplied to the assessee. During the year, the AO observed that the assessee has shown purchases of Rs.25,07,989/- from (a) Prayan Trading Co. (b) M/s Vitrag Trading Co. and (c) Sampark Steels. The submissions submitted by the assessee did not satisfy the AO as he was of the opinion after considering the reply and contentions , the assessee could not establish the genuineness of purchases of the commodities from the above cited entities. Therefore, the AO was of the view that actual transactions have not been taken place and orders were placed verbally and bills were provided to the assessee as accommodation entries and accordingly the AO treated the amount of Rs.25,07,989/- as bogus purchases to suppress the profits. Accordingly, the assessing officer added an amount of Rs.25,07,989/- to the total income of the assessee being unsubstantiated purchases. Aggrieved by the order of the AO the assessee preferred an appeal before the first appellate authority.