INCOME TAX OFFICER WARD 1(4), THANE vs. M/S. J.M.C. EQUIPMENTS & CO., THANE

The brief facts of the case as emanating from the records are: The assessment in the case of assessee for the AY 2011-12 was re-opened on the basis of information received from the Sales Tax Department, Government of आअसं. 5637/मुं/2019 (िन.व.2011-12) (A.Y.2011-12)

During assessment proceedings, the assessee failed to discharge its onus in proving genuineness of the purchases and the dealers. The notices sent to the dealers under section 133(6) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) were returned back unserved by the postal authorities with remarks “not known”. No confirmations were either filed by the assessee from the dealers. Further, the assessee could not furnish necessary documents viz. transport receipts, inward register etc. to prove trail of goods. The Assessing Officer (AO) made addition of entire alleged bogus purchases.

Shri Sushil Kuamr Mishra representing the Department vehemently defended the assessment order and prayed for reversing the findings of CIT(A). The ld. DR submitted that the assessee could not prove genuineness of the purchases and the dealers, therefore, entire bogus purchases were added by the AO. In support of his submissions, the ld. AR placed reliance on the decision

Submissions made by ld. DR heard, orders of authorities below examined. The assessee is in the business of engineering and fabrication, the assessee allegedly obtained bogus purchase bills amounting to Rs. 2,39,117/- from dealers declared as hawala operators by the Sales Tax Department, Government of Maharashtra. Undisputedly, the AO accepted the sales turnover declared by the assessee. Without purchases/inputs there cannot be sales, therefore, the entire alleged bogus purchases cannot be added. It is only the profit element embedded in such purchases that has to be brought to tax (Re: PCIT v/s Paramshakti Distributors Pvt. Ltd., decided on 15.07.2019). Thus, the AO erred in making addition of entire alleged bogus purchases. The CIT(A) estimated Gross Profit (GP) @ 12.5% on bogus purchases and restricted the addition to Rs. 29,890/-. I find no infirmity in the impugned order, the same is upheld and the appeal of Revenue is dismissed, sans merit.