IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE HON BLE SHRI MAHAVIR SINGH, JM AND HON BLE SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. No.4979/Mum/2018 (Assessment Year 2012-13) ACIT-27(1) M/s. Bhagwati Interiors Tower 6, 4th Floor 55/B, Waman Tukaram Patil Marg Room No.415 Opp. Amar Cinema, Near Star Garage Vashi Railway Station Complex Vs. Govandi-E Vashi, Navi Mumbai 400 703. Mumbai-400 088. PAN/GIR No. AAGFB-8358-N (Appellant) (Respondent) Revenue by Shri Ashutosh Rajhans-Ld.DR Assessee by Shri Prateek Jain-Ld.AR 09/09/2019 Date of Hearing 09/09/2019 Date of Pronouncement ORDER Per Bench:- 1. Aforesaid appeal by revenue for Assessment Year [AY] 2012-13 contest order of Ld. Commissioner of Income-Tax (Appeals)-24 2 ITA No.4979/Mum/2018 A.Y. 2012-13 M/s. Bhagwati Interiors Mumbai, [in short referred to as CIT(A) ], Appeal No. CIT(A)-24/IT- 150/256/AC-27(1)/2017-18 dated 24/05/2018 qua deletion of certain additions on account of alleged bogus purchases. grounds raised by revenue read as under: - 1. On facts and circumstances of case and in law, Ld. CIT(A) erred in deleting addition of Rs.4,48,016/- made by Assessing Officer on account of bogus purchases, without appreciating fact that assessee had failed to produce bills, vouchers and other documentary evidences in support of his claim and without considering latest Apex Court decision in case of N K Protein Ltd. wherein it is held that once it is proved that purchases are bogus then addition should be made on entire purchases and not on profit element embedded in such purchases. 2. On facts and circumstances of case, Ld. CIT(A) erred in estimating profit from Hawala Purchases by disallowing only Rs.64,002/- being 12.5% of bogus purchases as even basic onus of producing transport bills, delivery challans etc. were not fulfilled by assessee. 2.1 Facts on record would reveal that assessee being resident firm stated to be engaged as contractor, was assessed for impugned AY u/s. 143(3) on 19/03/2015 4 r.w.s. 147 wherein income of assessee was determined at Rs.4.83 Lacs after sole addition of alleged bogus purchases for Rs.5.12 Lacs as against returned loss of Rs.0.28 Lacs filed by assessee on 31/03/2014. 2.2 Upon perusal of purchases made by assessee, it transpired that assessee made aggregate purchase of Rs.5.12 Lacs from two entities which were listed as suspicious Hawala Dealers by Sales Tax Department. assessee failed to produce any of party to substantiate purchase transactions which led Ld. AO to disallow these purchases and accordingly same were added to income of assessee. 3 ITA No.4979/Mum/2018 A.Y. 2012-13 M/s. Bhagwati Interiors 2.3 learned first appellate authority, after considering assessee s submissions and relying upon decision of Hon ble Gujarat High Court rendered in CIT V/s Simit P. Sheth [356 ITR 451] restricted addition to 12.5% of disputed purchases which came to Rs.64,002/- and deleted balance additions. Aggrieved, revenue is in further appeal before us. It appears that assessee is not in further appeal. 3. respective representatives have advanced arguments, which we have duly considered. 4. We are of considered opinion there could be no sale without actual purchase of material keeping in view assessee s nature of business. As noted by first appellate authority, assessee was in possession of primary purchase documents and payments to suppliers were through banking channels. sales turnover reflected by assessee has not been disturbed / disputed by Ld. AO. However, at same time, assessee miserably failed to produce any of supplier to confirm transactions. Under such circumstances, additions which could be sustained, was to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in grey market and undue benefit of VAT against such bogus purchases, which Ld. first appellate authority has rightly done. Therefore, concurring with approach of learned first appellate authority in restricting additions to 12.5%, we dismiss appeal. So far as decision of Hon ble Gujarat High Court rendered in N.K. Industries Ltd. Vs DCIT [72 Taxmann.com 289] is concerned, we find that facts 4 ITA No.4979/Mum/2018 A.Y. 2012-13 M/s. Bhagwati Interiors of that case has already been distinguished by Hon ble Bombay High Court in Pr.CIT Vs. M/s Mohommad Haji Adam & Co. [ITA No.1004 & others of 2016, dated 11/02/2019] wherein Hon ble Court has approved estimation, on similar factual matrix, based on Gross Profit Rate. 5. In result, appeal stands dismissed. Order pronounced in open court on 09th September, 2019. Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) Judicial Member Accountant Member Mumbai Dated 09/09/2019 Sr.PS:-Jaisy Varghese /Copy of Order forwarded to 1. Appellant 2. Respondent 3. CIT(A) 4. CIT concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER, (Dy. Asstt.Registrar) , ITAT, Mumbai. ACIT-27(1), Navi Mumbai v. Bhagwati Interior