SHOBHA HARISH KHANDELWAL,MUMBAI vs. ITO 30(3)(3), MUMBAI

We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The ld AR for the assessee has not argued anything against the Ground No.1 raised in the present appeal. Thus, the Ground No. 1 is treated as not pressed and the same is dismissed as not pressed.

Ground No.2 relates to confirming the 30% of the disallowance on account of the bogus purchases. The Ld. AR of the assessee argued that assessee has filed the copies of purchases of invoice, ledger account, bank statement and the statements showing purchase and corresponding sales with respect to both the parties. It was argued that the assessee remained in regular business with M/s Chemic Age Enterprises in earlier as well as in subsequent year. The affidavit from M/s Chemic Age Enterprises was also filed before the lower authority confirming the business with them . The AO has not provided opportunity to cross-examine the parties , which stated to have issued bogus bill, the additions were made on the basis of Sales Tax Authorities information i.e. the third party information without verifying the correctness. The Ld. AR of the assessee relied upon the decision of jurisdictional High Court in CIT vs. M/s Nikunj Eximp Enterprises Pvt. Ltd. in ITA No. 5604/2010 dated 17.12.2012 and decision of Mumbai Tribunal in ACIT vs. Shri Ramila Pravin Shah in ITA No. 5246/Mum/2013 dated 05.03.2015. On the other hand, ld. DR for the Revenue supported the order of authorities below and argued that ld. CIT(A) has already given a substantial relief to the assessee. The assessee is not entitled for any further relief. It was further argued 3 Smt. Shobha Harish Khandelwal that the assessee failed to prove the transportation of the goods as no documents showing the details of vehicle bills, transportation bills, inward register, stock register and the payment received against such sales.

We have considered the rival contention of the parties and gone through the orders of authorities below. During the assessment proceeding, the AO observed that assessee has shown the purchases from M/s JMD Organic of Rs. 9,21,752/- and from M/s Chemic Age Enterprises of Rs. 21,39,306/-. The AO asked the assessee to furnish the supporting evidence in respect of purchases from the parties. The assessee furnished the copy of purchase bills and contended that purchases were made through banking channel. The contention of assessee was not accepted holding that assessee has not produced the parties, details of vehicle bills, transportation bill, inward register, stock register and the payment received against such sales. The notice sent u/s 133(6) to the parties were returned un-served. The assessee was asked to produce the parties, assessee stated that supplier are not available and it is not possible for assessee to produce the parties for examination. The AO further concluded that assessee failed to discharge the primary onus that purchases are bonafide and disallowed the entire purchases of these two parties. The ld. CIT(A) while considering the appeal uphold the re-opening of the assessment holding that a notice u/s 148 was issued on the basis of fresh information and tangible material and thus the re-opening was valid. On the grounds of addition/disallowance the ld. CIT(A) observed that assessee failed to produce the parties, no alternative address was filed in respect of said parties. The AO confronted all the material and finding to the assessee. Moreover, the information of Sales Tax Department was available on the Website and it was in the public domain. The assessee failed to bring the actual transportation and delivery of goods and thus the assessee failed to prove the goods were purchased from these two parties. The ld. CIT(A) examined the G.P. ratio of the assessee which is 22.44% and considering the fact of the case and the circumstances sustained to 30% of disallowance holding reasonable in case of assessee instead of disallowance of 100%. We have also considered the fact independently. We are of the considered opinion that under the Income Tax Act only the real income can be taxed by the Revenue. We may further conclude that even if the transaction is not verifiable, the only taxable is the taxable income component, not the entire transaction. The assessee is engaged in the business 4 Smt. Shobha Harish Khandelwal of trading of Chemicals after considering the rival contention of both the parties, we are of the opinion that in order to fulfill the gap of revenue leakage, the disallowance of reasonable percentage of such impugned purchase would meet the end of justice. Though the case was examined by ld. CIT(A) on the similar line and the ld. CIT(A) sustained the 30% of impugned purchases as per our view the 30% of the impugned purchases is at higher side. Considering the submission of both the parties, the addition is restricted to 12% of total impugned purchases (disputed purchases). The Hon’ble Bombay High Court in CIT vs. Hariram Bhambhani in ITA No. 313/2013 decided on 04.02.2015 also held that Revenue is not entitled to bring the entire sales consideration to tax but only the profit attributable to the total unrecorded consideration alone can be subject to tax. In view of the above discussion, we restrict the disallowance to 12% of the total impugned/bogus purchases. Thus, the ground of appeal