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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI D. KARUNAKARA RAO & SHRI C.N. PRASAD
Per C.N. Prasad, Judicial Member:
This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-32, Mumbai [(hereinafter referred to as the CIT(A)] dated 05.01.2016 for the assessment year 2011-12 arising out of the assessment order passed under section 143(3) read with section 147 of the Act. The assessee has taken the following grounds: “GROUND NO. 1: On the facts and circumstances of the case as well as law on the subject, the Id. CIT(A) has erred in confirming the action of the ITO in reopening the assessment u/s 147.
GROUND NO.2: In law and in the facts and circumstances of the appellant's case the learned CIT(A) has grossly erred in estimating additional gross profit of Rs.8,07,383/- @2.15% of disputed purchases and adding it to the income from business. He ought to have ordered for the deletion of the entire unexplained expenditure u/s 69C of income tax act., 1961.”
2 Nisrin Deesawala 2. At the time of hearing none appeared on behalf of the assessee nor any adjournment petition was moved. The notice sent by the registry has been returned unserved [by the postal authorities] with an endorsement “unclaimed”. Since the notice sent by the registry at the given address of the assessee is returned unserved we proceed to dispose of this appeal on merits by hearing the Ld. D.R.
The Ld. D.R. submits that the assessee an individual and doing business in the name of proprietorship M/s. Shabbir Traders filed return of income on 19.09.2011 declaring income at Rs.7,65,601/-. The assessment was completed under section 143(3) read with section 147 determining the income at Rs.4,82,96,710/-. While completing the assessment the Assessing Officer treated purchases of Rs.3,74,31,110/- as bogus purchases for the reason that the assessee failed to produce the persons from whom she made the purchases and requisite details called for were not produced. The Ld. D.R. submits that since the assessee has not produced requisite details the entire purchases were added as bogus and as unexplained expenditure under section 69C of the Act treating them as bogus purchases. The Ld. D.R. submits that on appeal by the assessee the Ld. CIT(A) taking note of various decisions of the Tribunal in similar circumstances held that assessee took only bills from the parties as accommodation to explain the purchases and at the same time the entire purchases from these parties cannot be added as bogus. Ld. CIT(A) held that what needs to be taxed is the profit element embedded in such transactions only. Therefore the Ld. CIT(A) estimated the gross profit ratio on such purchases at 2.15% which according to the Ld. CIT(A) is reasonable and thus restricted the addition to Rs.8,07,383/-. The Ld. D.R. vehemently supports the order of the Assessing Officer in treating the entire purchases as bogus purchases and making addition under section 69C of the Act.
We have perused the orders of the authorities below and heard the Ld. D.R. The Assessing Officer disallowed purchases to the extent of 3 Nisrin Deesawala Rs.3,74,31,110/- by treating them as bogus purchases and brought to tax under section 69C as unexplained expenditure on the ground that the assessee has not produced the parties, requisite details called for by the Assessing Officer were not produced by the assessee. We find that the Ld. CIT(A) after considering the submissions of the assessee and various case laws on similar circumstances held that entire purchases cannot be treated as bogus for the reason that the assessee has taken bills from these parties as accommodation to explain the purchases. He concluded that the reasonable estimation should be made towards gross profit on these purchases and he estimated the gross profit at 12.15% and restricted the addition to Rs.8,07,383/-. Having gone through the findings of the Ld. CIT(A), we do not find any valid reasons to interfere in the findings. The findings of the Ld. CIT(A) have not been controverted by the assessee. Thus we affirm the order of the Ld. CIT(A).
In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 30.11.2016.