ACIT 28(2), NAVI MUMBAI vs. M/S LUCID PRINTS, NAVI MUMBAI

The Brief facts are that the assessee is a partnership firm and is engaged in the business of offset printing works. The assessee has filed the return of income for the AY 2009-10 on 30.09.2009, disclosing a total income of ₹26,30,966/-.The return of income was processed under section 143(1) of the Act. Earlier the case was selected for scrutiny and the assesseement order was passed under section 143(3) of the Act on 05.12.2011 with a total income of ₹28,94,990/-.The Assessing Officer has received information from DGIT (Inv), Mumbai, wherein the assessee has made purchases from the Mum/2010 AY 2009-10; Lucid Prints Page | 3 parties, who are suspicious dealers as per list of Sale Tax Department. The A.O. based on the information, had reason to believe that the income has escapement assessment and hence a notice u/s 148 of the Act was issued. In compliance the assessee has filed a letter dated 07.04.2014 to treat the return of income filed on 30.09.2009 as a due compliance to the notice served.

Subsequently, notice under section 143(2) and 142(1) of the Act were issued and the learned AR of the assessee appeared from time to time and furnished the details. The Assessing Officer during the course of assessment proceedings found that the assessee has obtained the bogus purchase bills from two parties i.e. M/s Shreya Sales Corporation ₹33,58,914/- and M/s Kush Min Sales Pvt. Ltd ₹15,82,074/- both aggregating to ₹49,40,988/-. The Assessing Officer has issued notice under section 133(6) of the Act on these parties to check the genuineness of the purchase transactions. The said notices were returned back by the postal authorities with remark “not known”. The Assessing Officer has called for the additional information from the assessee to establish the genuineness of purchases of ₹49,40,988/-.The learned AR appeared and furnished the details on 09.02.2015. But the Assessing Officer was not satisfied with the information provided by the assessee and is of the opinion that the assessee could not satisfy the test of genuineness of the transactions. Finally The A.O. considered the Gross Profit (GP) rate@ 36% of bogus purchases as an Mum/2010 AY 2009-10; Lucid Prints Page | 4 income element and made addition, which work out to Rs.17,78,756/-and further disallowed excess claim of depreciation on Ups and Printers of ₹2,81,025/ and assessed the total income of ₹51,38,202/- and passed the order under section 143(3)r.w.s 147 of the Act dated 27.02.2015. Aggrieved by Assessing Officer order, the assessee has filed an appeal with the Commissioner of Income Tax (Appeals).

In the appellate proceedings the CIT(A) has considered the grounds of appeal, finding of the Assessing Officer and the submissions. The assessee has filed the written submissions referred at Para 5 of the CIT(A) order. The CIT(A) found that the Assessing Officer has made the addition considering the GP rate @ 36% and the A.O. has not doubted the sales. Further the CIT(A) relied on the decision of Hon’ble Gujarat High court in the case of CIT Vs. Simit P. Sheth, 356 ITR 451 (Guj) and has restricted the profit/income element rate @ 12.5% of the bogus purchases as against @ 36% adopted by the Assessing Officer and partly allowed the appeal. Aggrieved, by the order of the CIT(A), the Revenue has filed an appeal before the Honble Tribunal.

We heard the learned DR and perused the materials available on record. The sole crux of the disputed issue envisaged by the Ld.DR that the assessee has obtained the bogus purchase bills from the operators and the Assessing Officer made addition of income element@ 36% of the bogus purchases. Further, on assessee appeal to the CIT(A), the appellate authority considered the submissions, facts and observed that the Assessing Officer has not doubted the sales and made addition of higher GP rate. Therefore, the CIT(A) considering the ratio of the judicial decisions of the Hon’ble High court and Tribunal has restricted the addition at 12.5% of the bogus purchases.

The learned DR could not controvert the observations of the CIT(A) with any new cogent evidence or information and relied on the Assessing Officer’s order. We considering the facts, circumstances and the findings of the CIT(A) are of the opinion that the CIT(A) passed an reasonable order relying on the judicial decisions and allowed the relief to the assessee. Accordingly, we are not inclined to interfere with the CIT(A) order and uphold the same and dismiss the grounds of appeal of the revenue. Mum/2010 AY 2009-10; Lucid Prints Page | 6 9.In the result, the revenue appeal is dismissed. Order pronounced in the open court on 08.07.2021.