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TMI Blog2017 (12) TMI 1264X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of Rs.12683094/- and erred in treating the same as bogus purchase. 2. Learned assessing officer erred in rejecting the books of account on summarise(sic surmises) and conjecture basis and Learned CIT(Appeals) erred in confirming the same. 3. The appellant craves to leave, to amend, alter, to vary or modify any of the above grounds of appeal." 3. The brief facts of the case are that the assessee is an individual engaged in the business as dealer in Iron & Steel operating a proprietary concern in the name of M/s. Desai Iron & Steel Company. The return of income was filed by assessee for AY 2009-10 on 29-09-2009 declaring total income of Rs. 10,70,530/-. The Revenue framed an scrutiny assessment u/s 143(3) vide orders dated 23-12-2011 wherein the income assessed was Rs. 12,43,950/- as against returned income of Rs. 10,70,530/- Subsequently, information was received by the AO from Sales Tax Department and DGIT (Inv), Mumbai that some businessman had indulged in acceptance of the bogus purchase bills from the bogus hawala dealers. The investigation wing carried out detailed investigation with respect to the information received from Sales tax department that certain entitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts u/s. 145(3) and made the addition to the tune of 15% of the total amount of the bogus purchases of Rs. 8,45,53,960/- which led to the addition to the tune of Rs. 1,26,83,094/- towards unproved /non genuine purchases which was added to the total income returned, which additions were later upheld by learned CIT(A) vide appellate orders dated 12-09-2016 and the appeal of the assessee stood dismissed by learned CIT(A). 4. Aggrieved by the appellate order dated 12-09-2016 passed by learned CIT(A), the assessee has come in an appeal before the tribunal. The Ld. Counsel for the assessee at the outset submitted that there was an allegation of bogus purchases made by the assessee from 12 parties to the tune of Rs. 8.45 crores. It was submitted that the A.O. has made the additions to the tune of 15% of the said alleged bogus purchases which was later confirmed by learned CIT-A. It was submitted that the information was received by Revenue from Maharashtra VAT department that these twelve parties have issued bogus invoices without supplying any material and their owners have given statement before the VAT department that they were indulging in issuing bogus bills without supplying a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no. 315/Mum/2016 vide orders dated 04.08.2017 wherein the assessee claimed that under similar circumstances, the tribunal has upheld the addition by applying profit ratio of 5% of the bogus purchases. Ld. DR on other hand relied upon the order of learned CIT-A. 5. We have considered rival contention and perused the material on record. We have observed that the assessee is dealer in Iron & Steel and is proprietor of the concern namely M/s. Desai Iron & Steel Company. information was received by A.O from DGIT(Inv.) and Investigation wing of Maharashtra Sales Tax Department that the assessee is beneficiary of bogus purchases made from following twelve parties to the tune of 8.45 crores, as detailed hereunder.:- TIN Name of the Party Amount 27530623900V CENTURIAN SALES CORPORATION 777,713/- 27750595164V DEEP ENTERPRISES 13,664,430/ - 27480539295V JAI MA TA DI TRADING CO 7,807,791/- 27940584729V KOTSONS IMPEX PRIVATE LIMITED 5,251,938/- 27600648257V NIDDHISH IMPEX PVT LTD 10,015,750/- 27020680974V ROHIT ENTERPRISES 8,404,274/ - 27660660931 V SHREE SAl TRADING CO 7,064,083/ - 27500537441 V SKAND INDUSTRIES 6,414,236/- 27410583032V TARA ENTERPRISES ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the financial year 2008-09 by the assessee by Maharashtra VAT department on account of the default of these twelve dealers. The assessee has also placed on record settlement order with Maharashtra VAT department under Maharashtra Settlement of Arrears in Disputes Act, 2016 to reflect settlement entered into by the assessee with the Maharashtra Sales tax department wherein interest of Rs. 12.77 lacs and penalty of Rs. 16.31 lacs stood waived out of total demand of Rs. 49.66 lacs while the rest of the demand was agreed by the assessee to be paid, and paid challans for Rs. 28.04 lacs for period of financial year 2008-09. It is claimed that the liability of VAT which was additionally paid by the assessee to the tune of Rs. 16.31 lacs and also interest was an additional liability owing to failure of these twelve dealers which has reduced the profits to that extent which the assessee could have earned by obtaining the material from grey market and this should be taken into account while estimating profit under the Act. The assessee has submitted reconciliation statement of the stock and it is claimed that G.P of 2.64% was declared by the assessee. The assessee also relied upon the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d during appellate proceedings, the assessee submitted all the documentary evidences such as inward register, stock register, payment received against such sales, receipt of material purchases, account payee cheque. It was also argued that the AO has not doubted the sales and it is not possible to effect sales without purchase but the CIT(A) confirmed the action of the AO after considering the various case laws including the decision of the Hon‟ble Rajasthan High court in the case of CIT vs. Mangilal Choudhary 229 Taxman 378 (Raj) (2015) and he confirmed the addition by observing in Para 6.1 as under: - "6.1 It is seen from record that the A.O. has not mechanically disallowed the entire purchases amounting to Rs. 2,37,08,218/-. Further he has pointed out the apparent deficiencies in the books of the assessee and had thereafter rejected the books of the appellant by invoking the provision of section 145(3) of the Income Tax Act. When the basic details like purchases remain unverifiable, it is open for the A.O. to reject the books of the assessee. In a recent judgement, the Hon‟ble Rajasthan High Court has remarked in the case of CIT Vs. Mangilal Choudhary 229 Taxmann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and appeal of the assessee is partly allowed. We would like to clarify that the claim of the assessee for payment of additional VAT and interest on these alleged bogus hawala purchases from twelve dealers shall be verified by the AO as the said claim is set up for the first time before the tribunal and also since we have factored the additional VAT and interest etc. paid by the assessee on such alleged hawala purchases while estimating income on the said alleged hawala purchases by applying profit rate @5% of the alleged bogus purchases of Rs. 8.45 crores for the impugned assessment year, the deduction on account of additional VAT, interest etc paid by the assessee on these alleged bogus purchases cannot be availed once again in the year of determination of the additional liability by Maharashtra VAT authorities or in the year of payment thereof by the assessee as the case may be, as otherwise it will lead to double deduction to the assessee of the same expenses which is not permissible. The AO shall verify this aspect also before giving effect to our order. The assessee gets part relief. We order accordingly. 6. In the result appeal of the assessee in I.T.A. No. 6881/Mum/2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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