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.4992/Mum/2018 (Assessment Year 2009-10) Mr. Manish S. Rajani Income tax Officer -Ward 2(2) Block No. A-145, Room No.289. 2nd Floor, Mohan Mansion Kurla Camp Road Wayale Nagar, Khadakpada Ulhasnagar-421 004. Vs. Kalyan (West)-421 301. PAN/GIR No. ACXPR-7906-B (Appellant) (Respondent) Revenue by Shri Ashutosh Rajhans-Ld.DR Assessee by Shri Neha Paranjpe-Ld. AR 11/09/2019 Date of Hearing 11/09/2019 Date of Pronouncement ORDER Per Bench-1. Aforesaid appeal by assessee for Assessment Year [AY] 2009-10 contest order of Ld. Commissioner of Income-Tax (Appeals)-3, Thane, 2 ITA No.4992/Mum/2018 A.Y. 2009-10 Mr. Manish S.Rajani [in short referred to as CIT(A) ], Appeal No.ITA No.332-THN/14-15 dated 20/06/2018 on following grounds of appeal:- 1. Ld. Commissioner of Income Tax (Appeals)-III, Thane [here in after referred to as "Ld CIT (A)"] erred in passing order date 20-06-2018 disallowance @ 25% of Rs. 1102816/- works out @ Rs. 2,75,704/- are retained & relief is partly given @ Rs.827112/- in place of full Rs.1102816/-. Appellant prays that additions of Rs. 1102816/- made u//s 69 of I.T. Act by LT.O. Ward 2(2) at Kalyan on a/c of so called hawala purchases be deleted. 2. Penalty u/s 271(l)(c) was levied @ Rs. 330992/-. Penalty order was passed before service of notice & assessment order. Ld. C.I.T. (A) - III erred by not passing any order on penalty so levied illegally. 3. appeal fee payable @ Rs. 10000/- is paid challan is submitted herewith. 4. Additions made by I.T.O. @ Rs.1102816/- & Ld. C.I.T. (A) -III at Thane retained addition @ 25% @ Rs. 275704/-are unjustified, may kindly be deleted. 5. Penalty u/s 271(l)(c) Rs. 330992/- may kindly be deleted. 2.1 Facts on record would reveal that assessee being resident individual was assessed for impugned AY u/s. 144 r.w.s. 147 on 24/10/2013 wherein income of assessee was determined at Rs.15.07 Lacs after sole addition of alleged bogus purchases for Rs.11.02 Lacs as against returned income of Rs.4.05 Lacs filed by assessee on 17/09/2013 which was processed u/s.143(1). 2.2 Pursuant to receipt of certain information from investigation wing / Sales tax Department, Govt. of Maharashtra, it transpired that assessee stood beneficiary of alleged bogus purchases to tune of Rs.11.02 Lacs from 3 parties, details of which has already been extracted at para-2 of quantum assessment order. Accordingly, as per due process of law, re- assessment proceedings were initiated against assessee u/s 147 by issuance of notice u/s 148 on 15/04/2013 which remained un-responded to which led Ld. AO to frame assessment on best judgment basis. Relying upon investigations being carried out by Sales Tax Department, stated purchases were disallowed and added to income of 3 ITA No.4992/Mum/2018 A.Y. 2009-10 Mr. Manish S.Rajani assessee. learned first appellate authority, after considering remand report and assessee s submissions, restricted additions to 25%. Still aggrieved, assessee is under appeal before us. It appears that revenue is not in further appeal before us. 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. assessee was in possession of primary purchase documents and payments to suppliers were through banking channels. sales turnover has not been disputed / disturbed by revenue. However, at same time, notice issued u/s 133(6) to all entities remained unserved and assessee miserably failed to substantiate purchases. 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. However, finding estimate to be on higher side, we reduce same to 12.5%. same comes to Rs.1,37,852/-. impugned order stand modified to that extent. ground relating to penalty, being pre-mature, would not require any adjudication at this stage and therefore, dismissed. 5. Resultantly, appeal stands partly allowed. 4 ITA No.4992/Mum/2018 A.Y. 2009-10 Mr. Manish S.Rajani Order pronounced in open court on 11th September, 2019. Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) Judicial Member Accountant Member Mumbai Dated 11/09/2019 Sr.PS:-Jaisy Varghese Copy of Order forwarded to 1. Appellant 2. Respondent 3. CIT(A) 4. .CIT concerned 5. DR, ITAT, Mumbai 6. 3 Guard File BY ORDER, (Dy. Asstt.Registrar) , ITAT, Mumbai. Manish S. Rajani v. Income-tax Officer, Ward-2(2), Kalyan