DINESH B JHALA,MUMBAI vs. ITO 15(1)(4), MUMBAI

In this appeal the assessee is aggrieved for addition made by the AO disallowing purchase of Rs.20,17,416/- treating the same as bogus purchases.

Rival contentions have been heard and record perused. Facts in brief are that assessee is in the business of construction. On the information of sales tax authorities the AO disallowed purchases of Rs.20,17,416/- by observing that purchases made by the assessee from three parties appearing in the sales tax hawala list and claimed in its profit and loss account are not genuine. By the impugned order the CIT(A) confirmed the action of the AO.

I have considered rival contentions and found that merely on the basis of information from sales tax department, the AO has treated the purchases as bogus without making any independent enquiry. I also found that assessee had shown net profit of Rs.13,85,827/- on the sales of Rs.5.29 crores. However, the AO has declined the corresponding sales made by the assessee, nor rejected assessee’s books of accouns. Keeping view various judicial pronouncements referred by the AR in the case of Ganpatraj A Sanghvi, order dated 5-11- 2014 and JM Textiles, ITA No.7537&7538/M/2013, order dated 4-11-2015 and also considering the net profit rate shown by the assessee, I restrict the disallowance/addition to the extent of 5% of the bogus purchases so made by assessee. I direct accordingly.

In the result, appeal of the assessee is allowed in part. Order pronounced in the open court on this 08/07/2016.