DCIT 11 (1)(2), MUMBAI vs. SHAHASTRAA EXPORTS PVT. LTD., MUMBAI

Aforesaid appeal by revenue for Assessment year [AY in short] 2011-12 contest the order of Ld. Commissioner of Income Tax (Appeals)-18, Mumbai [in short CIT(A) ] dated 26/08/2019 which has provided certain relief to the assessee on account of alleged bogus purchases.

We have carefully heard the rival submissions and perused relevant material on record. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs. 3.1 The material facts are that the assessee being resident corporate assessee stated to be engaged in trading of chemical was assessed for the year under consideration u/s 143(3) on 21/03/2014. During assessment proceedings, it transpired that the assessee purchased import license for Rs.2.66 Lacs from an entity namely M/s Magnum Enterprises. The supplier was listed as bogus supplier by Sales Tax Department, Mumbai. Therefore, the assessee was directed to substantiate these purchases. 3.2 The assessee filed purchase bill, bank statements evidencing payment through banking channels and documents proving utilization of import license. However, Ld. AO observed that no documents were filed in respect of M/s Magnum Enterprises and the onus to substantiate the purchases remained un-discharged by the assessee. Accordingly, the said amount was disallowed and added back to assessee’s income while framing the assessment. 4. Upon further appeal, the assessee filed additional evidences u/r 46A which were subjected to remand proceedings. However, the assessee failed to make any submissions or evidence during remand proceedings. The supplier M/s Magnum Enterprises was not found at the given address. After considering remand report, Ld. CIT(A) observed that the assessee made import of Rs.13.15 Lacs using the import license and made corresponding sale of Rs.18.48 Lacs. The import was allowed by custom authorities. It was further observed that similar issue arose in appellate order for AY 2010-11 wherein the disallowance was estimated at 10%. Finally, the disallowance as made by Ld. AO was deleted. Aggrieved, the revenue is in further appeal before us.

Going by the factual matrix as enumerated in the orders of lower authorities, we find that the assessee miserably failed to substantiate the purchase of import license. No evidences could be furnished during remand proceedings and the supplier was not physically found at the address provided by the assessee. At the same time, the assessee had imported the material suing the import license which was ultimately sold at a profit. Though it was observed by Ld. CIT(A) that similar issue arose in appellate order for AY 2010-11 wherein the disallowance was estimated at 10%, however, the addition in full has ultimately been deleted. Therefore, in line with appellate order for 2010-11, we estimate the additions @10% of Rs.2,66,787/- which comes to Rs.26,679/-. The Ld. AO is directed to re-compute assessee’s income.

The appeal stands partly allowed. Order pronounced on 3rd May, 2021. Sd/- sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) उपाध्यक्ष / Vice President लेखा दस्य / Accountant Member मुिंबई Mumbai; सदनािंक Dated : 03/05/2021 Sr.PS, Jaisy Varghese आदेशकीप्रधिधलधपअग्रेधर्ि/Copy of the Order forwarded to : अपीलाथी/ The Appellant 1. प्रत्यथी/ The Respondent 2. 3. आयकरआयुक्त(अपील) / The CIT(A) आयकरआयुक्त/ CIT– concerned 4. सवभागीयप्रसतसनसध, आयकरअपीलीयअसधकरण, मुिंबई/ DR, ITAT, Mumbai 5. गार्डफाईल / Guard File 6. आदेशाि सार/ BY ORDER,