SHREEKAR POLYSTER PVT LTD,MUMBAI vs. ITO 4 (3)(4), MUMBAI

On the other hand, Shri Sanjay J. Sethi representing the Department vehemently defended the impugned order and prayed for dismissing appeal of the assessee. The ld. Departmental Representative submitted that the assessee failed to discharge its onus in proving genuineness of purchases and the dealers. The assessee failed to produce the dealers from whom suspicious purchases were made. Some of the dealers from whom assessee has abotained bills have admitted that bills were issued against cheque payments. Cash was withdrawn from Banks and cash is returned thereafter deducting

Both sides heard, orders of authorities below examined. Undisputedly, the assessee failed to discharge its onus in proving genuineness of purchases and the dealers from whom alleged bogus purchases were made. Documents viz. Octroi receipts, stock register, consumption records, etc. were not produced by the assessee before the authorities below to show trail of goods. At the same time we observe that the Assessing Officer has accepted the sales turnover and closing stock declared by the assessee. Without purchases there cannot be processing of yarn, therefore, entire alleged bogus purchases cannot be disallowed. The possibility is that the assessee made purchases from grey market and obtained bogus purchase bills from hawala operators. It is only the profit element embedded in such transactions that has to be brought to tax.[ Ref. PCIT vs. Paramshakhti Distributors Pvt. Ltd. in Income Tax Appeal No.413 of 2017 decided on 15/07/2019 by Hon'ble Bombay High Court.]. The ld. Authorized Representative for the assessee submitted that the G.P declared by the assessee in assessment year 2010-11 is 6.68%. However, on perusal of assessment order it is observed that the G.P has been worked out to be 8.12%. The same has not been disputed by the assessee either before the First Appellate Authority or the Tribunal. Taking into consideration entirety of facts, I am of considered view that to meet ends of justice it would be fair to restrict disallowance on unproved purchases to 10%. The ground No.1 of the appeal is thus, partly allowed in the aforesaid terms.

In ground No.2 of the appeal the assessee has assailed validity of assessment. Since no arguments were advanced on this ground, the same is dismissed.

In ground No.3 of appeal, the assessee has assailed charging of interest under section 234B and 234C of the Act. Since, charging of interest is mandatory and consequential this ground requires no separate adjudication.

The grounds No. 4 and 5 of appeal are general in nature, hence, require no adjudication.

In the result, appeal by the assessee is partly allowed.

Both sides are unanimous in stating that the facts and grounds of appeal in assessment year 2011-12 are identical to assessment year 2010-11. A perusal of the assessment order reveals that the addition on account of bogus purchases amounting to Rs.1,29,835/- has been made by the Assessing Officer in similar manner. As per the assessment order the G.P in assessment year 2011-12 is 9%. The CIT(A) has upheld the findings of Assessing Officer for the reasons similar to assessment year 2010-11. Since, facts in both the impugned assessment years are identical, the findings given while adjudicating the appeal of assessee for assessment year 2010-11 would mutatis mutandis apply to assessment year 2011-12. Consequently, the appeal of assessee for 2011-12 is partly allowed for parity of reasons. 10. To sum up appeal of the assessee in assessment year 2010-11 and 2011-12 are partly allowed.