ITO WARD 2 (3), THANE vs. SHRI. CHANDRAKANT P JADHAV, MIRA ROAD

The assessment for Assessment Year (AY) 2009-10 in the case of assessee was re-opened on the ground that the assessee has indulged in obtaining bogus purchase bills from suspicious dealers. The Assessing Officer (AO) during the course of assessment proceedings held that the assessee has obtained bogus purchase bills amounting to Rs. 7,66,544/- from three dealers i.e. 1. Modern Traders Rs. 3,19,617/- 2. Dharmesh Trading Company Rs. 2,00,000/- 3. Kludee Sales Rs. 2,46,927/- Total Rs. 7,66,544/-

Since, the assessee failed to prove genuineness of aforesaid dealers and the purchases made from them, the AO made addition of entire bogus purchases. The assessee carried the issue in appeal before the CIT(A). The CIT(A) restricted the addition to Rs. 95,818/- by estimating profit margin on bogus purchases to 12.5%. Hence, the present appeal by the Revenue.

Ms. Smita Verma representing the Department submitted that during assessment proceedings, notices were sent to the suspicious dealers from whom the assessee had made purchases. The vendors failed to respond to the notices. No document was furnished by the assessee to prove trail of goods, hence, the AO made addition of entire bogus purchases. The ld. Departmental Representative (DR) placed reliance on the decision of Hon’ble Supreme Court of India in the case of N.K. Proteins Ltd. v/s DCIT [84 taxmann.com 195] to contend that entire bogus purchases should be disallowed.

Submissions made by ld. DR heard, orders of authorities below examined. Undisputedly, the assessee failed to discharge his onus in proving authenticity of the dealers and purchases made from them during the period relevant to AY under appeal. At the same time, it is observed that the AO accepted sales turnover declared by the assessee. Without purchases there cannot be sales, therefore, it is only the profit element embedded in such transactions that can be brought to tax. The AO has erred in disallowing entire alleged bogus purchases. The CIT(A) has estimated profit margin of 12.5% on bogus purchases. I find no infirmity in the impugned order, hence, the same is upheld and appeal by the Revenue is dismissed, being devoid of any merit.