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.

In the appellate proceedings, the assessee submitted details of purchases and sales including year wise sales, G.P., GP%, NP and NP% which is incorporated in the appellate order. On the basis of detailed contentions and submissions supplied by the assessee during appellate proceedings, the ld. CIT(A) gave relief to the assessee to the extent of 60% of Rs.25,07,989/- i.e. the ld.CIT(A) sustained the addition of Rs.10,03,196/-. Now, the assessee has filed appeal before this Tribunal.

The ld. AR vehemently submitted before us that the FAA has grossly erred in sustaining the addition to the extent of 40% of the deemed bogus purchases by ignoring the facts on record and various judicial pronouncements. The ld. AR submitted that the assessee has received goods purchased from these dealers and hawala dealers were actually sold the goods to the assessee. The ld. AR pointed out that the material was received through delivery challans and payment thereof made through cheques and banking channels. The ld. AR tried to explain by his arguments by referring to the stock tally register and details of material received from the alleged hawala operators which were duly entered in the stock register and also recorded in the issue columns upon sale and consideration purchases and received form sales thereof. In support of his contention the ld. AR relief on the following case law: A) CIT v.Nikunj Eximp Enterprises (P.) Ltd. [2013] 35 taxmann.com 384 (Bombay) B) Babulal C. BoranaV/s ITO [2005] 144 TAXMAN 674 (BOM.) C) ITO V/s Vaman International P Ltd in (AY-2010-11) order dated 16.11.2016 D) M/s Imperial Imp and Exp V/s ITO in ITA No.5427/Mum/2015 (AY-2009-10) dated 18.3.2016; E) ITO V/s Deepak Popatlal Gala in ITA No.5920/Mum/2013 (AY-2010-2011) order dated 27.3.2015; F) ACIT V/s Shri Ramila Pravin Shah in ITA No.5246/Mum/2013 (AY-2010-11) dated 5.3.2015 and D) ITO V/s Paresh Arvind Gandhi in ITA No.5706/Mum/2013 (AY-2010-11) dated 13.5.2015 E) ACIT V/s Tarla R Shah in ITA No.5295/Mum/2013 (AY-2010-11) order dated 2.2.2016