IN INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBERAND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA no.3507 & 3508/Mum./2018 (Assessment Year 2008 09 & 2009 10) Income Tax Officer. Appellant Ward 25(3)(4), Mumbai v/s Shri Suresh Maneklal Sheth 1, Kusum Niwas, S.V. Road, Irla . Respondent Vile Parle (W), Mumbai 400 056 PAN AJMPS0119H ITA no.3581 & 3582/Mum./2018 (Assessment Year 2008 09 & 2009 10) Shri Suresh Maneklal Sheth 1, Kusum Niwas, S.V. Road, Irla. Appellant Vile Parle (W), Mumbai 400 056 PAN AJMPS0119H v/s Income Tax Officer . Respondent Ward 25(3)(4), Mumbai Revenue by Shri Chaudhary Arunkumar Singh Assessee by Shri Prateek Jain Date of Hearing 08.08.2019 Date of Order 30.08.2019 ORDER PER BENCH These are two sets of cross appeals arising out of two separate orders, both dated 21st April 2015, passed by learned 2 Shri Suresh Maneklal Sheth Commissioner of Income Tax (Appeals) 37, Mumbai, pertaining to assessment years 2008 09 and 2009 10. 2. Since all these appeals pertain to same assessee involving common issues arising out of identical set of facts and circumstances, therefore, as matter of convenience, these appeals were heard together and are being disposed off by way of this consolidated order. 3. Brief facts are, assessee, individual, is carrying on business of trading in paper through his proprietorship concern Namrata Paper Agencies. For assessment year under dispute, assessee had filed his return of income in regular course declaring income of ` 8,41,990, and ` 6,72,160, for assessment years 2008 09 and 2009 10 respectively. On basis of information received from Sales Tax Department, Government of Maharashtra and DGIT (Inv.), Mumbai, that certain purchases shown by assessee in these years are not genuine as they are mere accommodation entries through bogus purchase bills, Assessing Officer re opened assessment under section 147 of Income Tax Act, 1961 (for short "the Act"). In course of assessment proceedings, Assessing Officer called upon assessee to prove genuineness of purchases made of ` 75,82,917, in assessment year 2008 09 and ` 85,97,910, in assessment year 2009 10. As observed by Assessing Officer, except furnishing purchase bills, bank account copy, etc., 3 Shri Suresh Maneklal Sheth assessee could not furnish any supporting evidences to prove actual delivery of goods and further, since, notices issued under section 133(6) of Act, returned back unserved by postal authority, Assessing Officer held that purchases claimed to have been made are mere accommodation entries and accordingly disallowed them. Having done so, Assessing Officer added back entire non genuine purchases to income of assessee in both assessment years. addition made in different assessment years are as under: A.Y. 2008 09 ` 75,82,917 A.Y. 2009 10 ` 85,97,910 4. Being aggrieved with aforesaid additions, assessee preferred appeals before first appellate authority. 5. After considering submissions of assessee in light of certain judicial precedents, learned Commissioner (Appeals) observed that Assessing Officer has not disputed sales effected by assessee. Further, he observed, there is no dispute that assessee has made payment through cheques and there is nothing on record to show that assessee has received back amount in cash from suppliers. Thus, applying ratio laid down by Hon'ble Jurisdictional High Court in Nikunj Eximp Enterprises v/s CIT, and decision of Hon ble Gujarat High Court in CIT v/s Simit P. Sheth, 356 4 Shri Suresh Maneklal Sheth ITR 451 (Guj.), learned Commissioner (Appeals) ultimately restricted addition to 12.5% of non genuine purchases in both years. Being aggrieved with aforesaid decision of learned Commissioner (Appeals), both parties are in appeal before us. 6. learned Authorised Representative reiterating stand taken before Departmental Authorities submitted, since purchases made by assessee are genuine, no addition should be made. Without prejudice, learned Authorised Representative submitted, estimation of profit @ 12.5% by learned Commissioner (Appeals) is high and excessive considering profit margin in paper business. He submitted, assessee has shown gross profit of 8.34% in assessment year 2008 09 and 4.54% in assessment year 2009 10. He submitted, let addition be restricted to difference between rate of profit estimated by learned Commissioner (Appeals) and gross profit margin shown by assessee. 7. learned Departmental Representative strongly relying upon observations of Assessing Officer submitted, since assessee has failed to prove genuineness of purchases and it is proved that assessee has availed accommodation entries from hawala operators, Assessing Officer was justified in adding entire non genuine purchases. He submitted, learned Commissioner (Appeals) has committed error in restricting addition to 12.5%. 5 Shri Suresh Maneklal Sheth 8. We have considered rival submissions and perused material on record. At outset, we propose to address grounds raised by assessee challenging validity of re opening of assessment under section 147 of Act. On perusal of material on record, it is evident that after completion of original assessment, Assessing Officer received information from percentage of DGIT (Inv.), Mumbai, as well as Sales Tax Department, Government of Maharashtra, indicating that assessee is beneficiary of accommodation entries provided by certain hawala operators by way of bogus purchase bills. On basis of such information available on record, Assessing Officer has re opened assessments under section 147 of Act. Thus, it is evident, on basis of tangible material available on record, Assessing Officer has formed belief that income chargeable to tax has escaped assessment requiring re opening of assessment under section 147 of Act. In view of aforesaid, we hold that re opening of assessment under section 147 of Act in facts of present case are valid. 9. Having held so, now we propose to deal with merits of additions made by Assessing Officer and partly sustained by learned Commissioner (Appeals). As could be seen from facts on record, in course of assessment proceedings assessee had failed to prove genuineness of purchases from declared source by 6 Shri Suresh Maneklal Sheth furnishing any cogent evidence to show actual delivery of goods. Further, notices issued under section 133(6) of Act by Assessing Officer to verify genuineness of purchases also returned back un served, hence, identity of selling dealers could not be established. However, it is fact on record that sales effected by assessee have not been disputed by Assessing Officer. That being case, it has to be concluded that in absence of purchases, assessee could not have effected corresponding sales. Thus, dispute remains only with regard to source from which assessee purchased goods. In aforesaid factual position, addition of entire purchase is not justified. Therefore, to that extent, learned Commissioner (Appeals) was correct in estimating profit on non genuine purchases for purpose of addition. 10. Now reverting back to reasonableness of estimating profit @ 12.5%, after over all consideration of facts and material on record, nature of business carried on by assessee as well as gross profit margin earned, we are of view that estimation of profit @ 6% of non genuine purchases would be reasonable. Accordingly, we direct Assessing Officer to restrict addition in both assessment years under appeal to 6% of non genuine purchases. Grounds raised by Revenue are dismissed and grounds raised by assessee are partly allowed. 7 Shri Suresh Maneklal Sheth 11. In result, Revenue s appeals are dismissed and assessee s appeals are partly allowed. Order pronounced in open Court on 30.08.2019 Sd/- Sd/- N.K. PRADHAN SAKTIJIT DEY ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 30.08.2019 Copy of order forwarded to (1) Assessee (2) Revenue (3) CIT(A) (4) CIT, Mumbai City concerned (5) DR, ITAT, Mumbai (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai Income-tax Officer Ward25(3)(4), Mumbai v. Suresh Maneklal Sheth