DY CIT CIRCLE-3 , THANE vs. SHREE SADGURUKRUPA CONSTRUCTION, THANE

The present appeal filed by the revenue is directed against the order passed by the CIT(A)-2, Nashik, dated 08.07.2019 which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short „Act‟) dated 26.03.2013 for A.Y. 2010-11. The revenue has assailed the impugned order on the following grounds of appeal before us: "1. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) has erred in not appreciating the fact that the assessee could not establish the genuineness of the purchases from the non-existent vendors as per information received from Law enforcement agency of State Govt. of Maharashtra i.e. Sales Tax Department, and established by the Assessing Officer.

During the course of the assessment proceedings, the A.O, inter alia observed that the assessee had claimed to have made purchases of Rs. 34,60,226/- from M/s Shree Ganesh Trading Company. In order to verify the genuineness and veracity of the said purchase transactions the A.O issued notice under Sec. 133(6) to the aforesaid supplier party, which, however remained uncomplied with by the latter.The A.O directed the assessee to substantiate the authenticity of the purchases claimed to have been made from the aforementioned party. However, the assessee except for placing on record the sale bills of the aforesaid party did not lead any such documentary evidence which would substantiate the authenticity of the impugned purchase transactions to the satisfaction of the A.O. Apart from that, it was gathered by the A.O that the aforesaid supplier party was black listed as a hawala entry provider by the Sales Tax Department, Maharashtra. Backed by the aforesaid

On appeal, the CIT(A) called for a „remand report‟ from the A.O. It was observed by the CIT(A) that the assessee had claimed to have purchased M.S Channels, Angles, Joints and Aluminium sections from the aforesaid supplier party i.e M/s Shree Ganesh Trading Company. It was further observed by the CIT(A) that the assessee in order to support its claim of having made genuine purchases from the aforementioned supplier party had in the course of the assessment proceedings placed on record certain documentary evidences, viz. copy of the ledger account of the supplier party; purchase bills; delivery challans alongwith evidence that the payment of the purchase consideration to the said party was made through banking channel. It was noticed by the CIT(A) that the A.O in the course of the remand proceedings could not rebut or dislodge the authenticity of the documents on the basis of which the assessee had claimed to have made genuine purchases from the aforementioned party. It was observed by the CIT(A) that the A.O had disallowed the purchases for two fold reasons, viz. (i). that the aforesaid supplier party had not responded to his notice issued under Sec. 133(6) of the Act; and (ii). that the name of the aforementioned supplier party figured in the list of the hawala parties as was uploaded by the Sales Tax Department, Maharashtra. Observing, that though the assessee had made the impugned purchases but could not substantiate the veracity of the purchase transactions due to unavailability of the supplier party, the CIT(A) held a conviction that disallowance of 20% of the impugned purchases would meet the ends of justice.

Aggrieved, the revenue has assailed the order of the CIT(A) in appeal before us. It was averred by the ld. D.R that the CIT(A) had without any justifiable reason scaled down the disallowance of the impugned purchases so made by the A.O to 20% of its aggregate value. Accordingly, It was submitted

Per contra, the ld. Authorised representative (for short “A.R”) for the assessee relied on the order passed by the CIT(A).

We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. Admittedly, the assessee had failed to substantiate to the hilt the authenticity of the impugned purchases which were claimed to have been made from the aforementioned supplier party i.e M/s Shree Ganesh Trading Company. As is discernible from the orders of the lower authorities, the assessee had tried to substantiate the authenticity of the impugned purchases on the basis of supporting documentary evidence, viz. copy of the ledger account of the supplier party; purchase bills; delivery challans alongwith evidence that the purchase consideration was paid to the aforesaid party through banking channel. In our considered view, the aforesaid documentary evidence placed on record by the assessee, viz. purchase bills, delivery challans, coupled with the fact that the payment of the purchase consideration to the supplier party was made by it through banking channel though may not conclusively prove the authenticity of the impugned purchase transactions, but, the same, does inspire sufficient confidence as regards the genuineness of the purchase transaction in question. Apart from that, we find that the A.O had neither rejected the books of accounts of the assessee nor doubted its corresponding sales. As such, the fact that the assessee had purchased the impugned goods, though, not from the aforementioned supplier party but from the open/grey market cannot be ruled out. In our considered view, the CIT(A) had rightly observed that it is a case where the assessee could not get the impugned purchases verified due to unavailability of the supplier party. In the totality of the aforesaid facts, we concur with the view taken by the CIT(A) that in all fairness disallowance of 20% of the unverified purchases in question

Resultantly, the appeal filed by the revenue is dismissed.