RAKESH S LILANI,ULHASNAGAR vs. ITO WD 2(3), KALYAN

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ITA 5425/MUM/2016Status: DisposedITAT Mumbai28 February 2017AY 2011-123 pages
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What did the Tribunal hold?

The Tribunal held that the AO should not have added the entire purchase amount. The addition should be restricted to the extent of the assessee's GP rates and applicable VAT rates, after granting the assessee an opportunity to be heard.

What were the facts?

The assessee, engaged in edible oil trading, had purchases amounting to Rs. 4,02,564/- from a party identified as a hawala dealer. The AO made an addition of the entire purchase amount as the dealer did not respond to a notice. The CIT(A) confirmed this addition.

What were the issues?

Whether the entire purchase amount from a hawala dealer can be added when the sales account is undisturbed, and if not, how should the addition be quantified.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 133(6)

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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SHRI D. KARUNAKARA RAO

For Appellant: Shri Rajiv Khandelwal
For Respondent: Ms. Beena Santosh, DR
Hearing: 09.02.2017Pronounced: 28.02.2017

सुनवाई की तायीख / Date of Hearing : 09.02.2017 घोषणा की तायीख /Date of Pronouncement : 28.02.2017 आदेश / O R D E R PER D. KARUNAKARA RAO, AM:

This appeal filed by the assessee on 6.9.2016 is against the order of the CIT (A)-3, Mumbai dated 1.7.2016 for the assessment year 2011-12. In this appeal, assessee raised the following grounds which read as under:- “1. On the facts and circumstances of the case and in law, the Ld CIT (A) erred in upholding the additions made by the Income Tax Officer (AO) on account of expenses.

2. The Ld CIT (A) upheld the additions made by the AO without cosiderin the facts of the case and ignoring the various documents produced and various explanations offered to him during the course of hearing.”

2. Briefly stated relevant facts of the case are that the assessee is engaged in the business of „trading in edible oil‟. Assessee filed the return of income declaring the total income of Rs. 7,99,700/-. Assessment was completed u/s 143(3) r.w.s 147 of the Act and the assessed income was determined at Rs. 12,02,264/-. During the assessment proceedings, AO noted that there were purchases amounting to Rs.4,02,564/- involving M/s. Somnath International, a hawala dealer. After invoking the provisions of section 133(6) of the Act, considering the „no reply‟ from the said party, AO proceeded to make entire amount as addition. Assessee failed to produce money receipts, stock register etc as per the AO. Matter travelled to the first appellate authority.

3.

During the proceedings before the first appellate authority, after considering the submissions of the assessee, CIT (A) confirmed the addition made by the AO. In the process, CIT (A) held that GP rate in the year under consideration is relatively lower when compared to that of the ester assessment years ie 2.31% and 2.26% for the AYs 2009-10 and 2010-11 respectively. It is an undisputed fact that sales account of the assessee is undisturbed. Aggrieved with the said decision of the CIT (A), assessee is in appeal before the Tribunal.

4.

Before me, Ld Counsel for the assessee submitted that the manner, in which the entire sales from M/s. Somnath International is added, is absolutely against the judgment of the Hon‟ble Bombay High Court in the case of CIT vs. Nikunj Eximp Enterprises Pvt Ltd (216 Taxman.com 171) (Bom.), when the sales account is undisturbed. Further, Ld AR for the assessee brought our attention to number of decisions wherein such additions are not approved by the Tribunal and restricted the addition to the GP rates of the assessee in the similar lines of business. Further, it is the argument of the Ld AR that there is an evidence for transport of the goods which shows the genuineness of the purchases. However, there is no evidence furnished before us to demonstrate the same.

5.

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 us, I am of the opinion, the AO should not make entire such purchases as additions. However, AO may study the GP rates of the assessee and also applicable VAT rates and restrict the addition, if any, to that extent. Accordingly I order. AO shall grant a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. Thus, grounds raised

by the assessee are allowed for statistical purposes.

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