ITO 32 (3)(3), MUMBAI vs. SAMEER CONSTRUCTION, MUMBAI

This appeal by the Revenue is against the order of Commissioner of Income Tax (Appeals)-44, Mumbai ( in short ‘the CIT(A)’) dated 26/04/2019 for the assessment year 2011-12.

The brief facts of the case as emanating from records are : The assessee/respondent is a builder and developer. The assessee filed its return of income for the impugned assessment year on 09/09/2011 declaring total income of Rs.20,032/-. During the course of scrutiny assessment proceedings the Assessing Officer observed that the assessee had made purchases from M/s. Shankeshwar Trading Co. for Rs.22,511/- and M/s. Ajay Stones for Rs.1,15,000/-. Both the aforesaid parties were declared as bogus entry providers by the Sales Tax Department, Government of Maharashtra. The assessee was asked to prove genuineness of purchases from said parties. The assessee failed to produce relevant documents viz. inward registers, octroi receipts, delivery challans, transport receipts, etc. to prove trail of goods. The assessee further failed to furnish any confirmations, from the said suppliers of the goods to prove genuineness of the parties. Consequently, the Assessing Officer made addition of the entire alleged bogus purchases aggregating to Rs.1,37,511/-. Aggrieved by the assessment order dated 24/03/2014 passed under section 143(3) r.w.s. 147 of the Act, the assessee filed appeal before the CIT(A). The CIT(A) after examining the facts of the case and considering decisions on the issue of addition on account of bogus purchases rendered by Hon’ble High Courts and various Benches of the Tribunal, restricted the addition to 12.5% of such bogus purchases. Against the findings of CIT(A) the Revenue is in appeal before the Tribunal.

Shri Sanjay J. Sethi, representing the Department vehemently defended the assessment order and prayed for reversing the finding of CIT(A). The ld.Departmental Representative submitted that assessee failed to prove genuineness of purchases and the suppliers of goods. Even notice issued under section 133(6) of the Act to the suppliers were returned back unserved. The ld.Departmental Representative placed reliance on the decision of Hon'ble Supreme Court in the case of Hon'ble Supreme Court of India in the case of N.K. Proteins Vs. DCIT in SLP No.(C) 769 of 2017 decided on 16/01/2017.

We have heard the submissions made by ld.Departmental Representative and have examined the orders of authorities below. Undisputedly, the assessee has failed to prove genuineness of the purchases made from M/s.Shankeshwar Trading Co. and M/s. Ajay Stones. The Assessing Officer made addition of the entire alleged bogus purchases made from the aforesaid suppliers. The Assessing Officer neither rejected the books nor has raised any doubt on the construction activities carried out by the assessee. Without purchases of material the assessee could not have carried out construction business. Hence, entire bogus purchases cannot be added. The CIT(A) has restricted the addition to 12.5% of such bogus purchases. We find that the order of CIT(A) is in line with the judgment of Hon'ble Bombay High Court in the case of PCIT vs. Paramshakhti Distributors Pvt. Ltd. in Income Tax Appeal No.413 of 2017 decided on 15/07/2019. We concur with the finding of CIT(A) and dismiss the appeal of Revenue being devoid of any merit.

In the result, appeal by the revenue is dismissed.