ASSISTANT COMM OF INCOME TAX 24(1) , MUMBAI vs. M/S. AIRPAC LAMINAR, MUMBAI

The only issue to be decided in this appeal of the Revenue is as to whether the learned CIT(A) was justified in deleting 100% value of bogus purchase in the facts and circumstances of the instant case.

We have heard the rival submissions and perused the material available on record. We find that the assessee is a partnership firm engaged in executing and undertaking turnkey erection, installation and commissioning contracts with regard to clean room equipments throughout the country. Return of income for A.Y. 2009-10 was electronically filed by the assessee firm on 23.9.2009 declaring total income of Rs. 5,32,080/-. Based on the information received from the Sales Tax Department, Government of Maharashtra, through DGIT(Investigation) of Income Tax Department, Mumbai, the learned Assessing Officer came to know of the fact that the assessee had made certain purchases

2 M/s. Airpac Laminar from certain tainted parties totalling to Rs. 10,07,746/-. Since these suppliers were treated as tainted dealers as per website of Government of Maharashtra, purchases made by the assessee from these suppliers would have to be disallowed and for this purpose, case of the assessee was reopened by the learned Assessing Officer by issue of notice under section 148 of the Act. The validity of reassessment framed in the hands of the assessee is not in dispute. The learned Assessing Officer in reassessment proceedings called for following documents from the assessee to prove the genuineness of the purchases in the sum of Rs. 10,07,746/- :- i) Copy of ledger account ii) Copy of invoice iii) Copy of delivery challan iv) Copy of lorry receipts v) Copy of bank statement vi) Copy of octroi receipts vii) Copy of goods receipts viii) Note on tally between sales and purchases ix) Note on stock 4. In response to the aforesaid query, the assessee’s representative filed written submissions producing invoices of parties, ledger accounts, bank statement indicating entry of payment made to the suppliers. The assessee could not produce the concerned suppliers before the learned Assessing Officer for examination. When show-caused by the learned Assessing Officer as to why the said purchases of Rs. 10,07,746/- should not be disallowed as bogus purchase, the assessee submitted that the purchases made by it are genuine and that it is not having transaction with the said suppliers for the last five years, however, agreed for the disallowance of purchase to buy mental peace. This fact is recorded in page No. 3 of paragraph 3.3 of the assessment order. The learned Assessing Officer proceeded to disallow purchase of Rs. 10,07,746/- in the assessment.

The Learned CIT(A) however observed that the assessee had made genuine purchases from the suppliers to the tune of Rs. 10,07,746/- and since

Aggrieved by this, the revenue is in appeal before us.

We find that the assessee had merely produced the bank statement indicating payment made to the concerned supplier together with the purchase invoice and ledger account of the supplier. The assessee had not furnished confirmation from the concerned supplier to prove its bonafide. Even notice sent under section 133(6) of the Act by the learned Assessing Officer revealed that the purchases made by the assessee are not genuine. The assessee could not produce the parties for verification before the learned Assessing Officer to enable the learned Assessing Officer to record statement from the supplier and ascertain genuineness of the purchases made by the assessee. Considering the totality of the peculiar facts and circumstances of the instant case, it could be safely concluded that the assessee had not proved its purchases beyond reasonable doubt. However, the purchases made by the assessee had been duly consumed in the manufacturing activity of the assessee. On this fact, there is absolutely no dispute. Hence, the only logical conclusion that could be reached is that the assessee could have purchased goods from the grey market in order to save indirect taxes and incidental profit element thereon. In these circumstances, only the profit element embedded in the value of such purchases could be brought to tax. This Tribunal has been consistently holding such profit element of 12.5% to be reasonable. Hence, we hold that the only profit element of 12.5% of Rs. 10,07,746/- should be brought to tax on an estimated basis in the instant case. We direct the learned Assessing Officer accordingly. Accordingly grounds raised by the Revenue are partly allowed.

In the result appeal of the Revenue is partly allowed. Order pronounced in the open court on 31.05.2022.