ITO WARD 3(2), THANE vs. M/S BHARAT GRAHAK SAHAKARI SANSTHA MARYADIT, THANE

Shri Sanjay J. Sethi representing the Department submitted that the assessee is engaged in trading of stationery items. During the period relevant to AY under appeal, the assessee had obtained bogus purchase bills amounting to Rs. 9,07,814/- from M/s V-3 Enterprises. To verify genuineness of the transactions, the Assessing Officer (AO) issued notice under section 133(6) of आअसं. 7803/मुं/2019 (िन.व.2009-10) (AY-2009-10) the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] to the aforesaid dealer. The notice was received back unserved from postal authorities. During assessment proceedings, the assessee could neither produce the dealer nor could file confirmation from the said dealer. No evidence in support of transportation of the goods viz. lorry receipts, delivery challen, inward register, etc. was furnished by the assessee. Thus, the assessee could neither prove genuineness of the aforesaid dealer nor purchases made from the said dealer. The AO disallowed entire bogus purchases. In First Appellate proceedings, the CIT(A) restricted the disallowance on bogus purchases to 12.5%. Now, the Revenue is in appeal against the relief granted by the CIT(A) to the assessee. The ld. Departmental Representative (DR) vehemently supported the assessment order and further placed reliance on the decision of Hon’ble Supreme Court in the case of N.K. Proteins Ltd. v/s DCIT [84 taxmann.com 195] to support 100% disallowance of bogus purchases.

Submissions made by ld. DR heard, orders of authorities below examined. Undisputedly, the assessee failed to discharge his onus in proving genuineness of the dealer and purchases made from the said dealer. At the same time, it is observed that the AO has not disturbed the sales turnover declared by the assessee. The CIT(A) has upheld the findings of AO to the extent of assessee’s involvement in obtaining bogus purchase bills. The CIT(A) has estimated suppressed profit margin in bogus purchases to 12.5%. In such like suspicious transactions, entire purchases cannot be disallowed, if the AO accepted the sales turnover declared by the assessee. It is only the profit element embedded in such transactions that can be brought to tax [Re: PCIT vs.