HEMANT R SANGHAVI,MUMBAI vs. ASST CIT 16(2), MUMBAI

This appeal is filed by the assessee against the order of CIT(A) dated 21.01.2015 for the assessment year 2010 – 11.

Following grounds are raised in the appeal which read as under:-

The assessee is an individual derived the income from House Property, Business, Capital Gain and other sources. During the course of assessment proceedings AO observed that assessee has debited purchase of Rs.30,26,81,545/- to profit and loss account. The information was received from the Sales Tax Department regarding the suspicious party providing the accommodation entries without doing any actual business. The purchase made up is through Tulsiani Trading private Limited and Niddhish Impex Private Limited that the ITA.NO.2299/Mum/2015 Hemant R. Sanghvi information evade to AO. The Assessing Officer asked to explain that documentary evidence as to why the amount of Rs.22,07,696 should not be added to the total income as bogus purchase after considering the reply the Assessing Officer has treated Rs.22,07,696/- as unexplained u/s.69C of the Income- tax Act. Matter carried to CIT(A) and CIT(A) has sustained the Gross Profit at 12.5%. The assessee is in appeal against the same.

The Ld.AR submitted that during the course of assessment proceedings the assessee has made certain purchases from the party which was treated has bogus purchases. The AO and CIT(A) has treated this purchases as bogus purchases. But when assesses has provided Bank Statement reflecting the payment made account pay cheque, stocks statement reflecting inward entry of the goods and the assessee has explained the modus operandi of the business and wherein assessee has made purchase from third party and the parties mentioned in the bill were not given the goods but some other party has given the goods. The Ld.AR submitted that in such case when Assessee submitted stock statement maintained by the assessee confirming the inward and movement of goods these goods has in turn sold to the third party, the profit in respect which has been offered to tax by the assessee. Merely on the statement of some parties before VAT authority cannot be treated as bogus, when assessee has submitted all the documentary evidence Invoices, Bank Statements, Stock Registry, Transport Invoices Loading and Unloading Invoices. Therefore assessee has saved only VAT and VAT element is only 4% of the sales. Therefore the addition maintained by the CIT(A) is not justifiable.

We have heard the rival contentions of both the parties looking to the facts and circumstances of the case we find that in this case the CIT(A) has considered that quantity details were maintained and Assessing Officer has no doubt about the genuineness of the sales. Therefore addition in respect of the mix credit balances on purchase subject when the AO himself recorded the evidence that assessee has made the purchase from some other party. Therefore what can be added is the profit embedded in bogus purchases which are to be added. The CIT(A) has considered the decision of Hon’ble Gujarat High court in Case Bholanath Poly Fab Pvt. Ltd. 355 ITR 290 (Guj) wherein the Gujarath High Court has held Purchases from the bogus party and if party was not produced before the AO for confirmation the only profit element can be added, in that case the Tribunal has held that the purchase were made from the bogus parties, nevertheless, the purchases themselves were not bogus to the entire quantity of opening stock, purchases and sales were tallying and hence only the profit

In this case the CIT(A) has categorically heard that quantity details were maintained and Assessing Officer has no doubt about the genuineness of the sale. Therefore this finding of fact that the assessee has made purchase but assessee had made the purchase from the other parties. Therefore we are of the view that when the assessee submitted the ledger account of the parties, copies of the bills, transport bills, loading and unloading bills along with the bank statement in which the payment is made to such party. Therefore assessee did purchase from different sources. Therefore considering the same we are of the view that the CIT(A) has justified. We also find from the decision of Hon’ble Gujarat High court in Case of CIT v. Simit Sheth (2013) 38 Taxmann.com 385 (Guj) wherein the similar issue had come up before the Hon’ble High Court and wherein the tribunal has held that the alleged suppliers of steel to the assessee assessee have not supplied the goods but only provided sale bills and hence the purchases from the said parties is held to be bogus. The CIT(A) has held that assessee indeed has purchased not from the mentioned partied from other parties from gray market and sustain addition as profit of the assessee, similar in this case the facts are nearer to the facts of this case. Assessing Officer himself has stated that assessee might have purchased from the unknown sources which has known to the assessee. Therefore we are of the view that the CIT(A) has justified in his action and our interference is not required. In the result the assessee appeal is dismissed.

In the result the appeal is dismissed.