VEMB LIFESTYLE PVT. LTD.,MUMBAI vs. ACIT 11 (3)(2), MUMBAI

Aforesaid appeal by assessee for Assessment Year [in short referred to as ‘AY’] 2013-14 contest the order of Ld. Commissioner of Income-Tax (Appeals)-18, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No.CIT(A)-16/IT-10106/DCIT-11(3)-2/16-17 dated 28/02/2019 on following grounds of appeal:-

Without prejudice, the Ld. CIT(A) erred in facts and law in arbitrarily estimating profit element @12.5% of alleged purchases without appreciating that the product sold is not covered under any MVAT/ Sales tax laws and thereby ignoring the overall gross profit in such industry. As evident the assessee is aggrieved by estimated addition on account of alleged suspicious purchases. The assessee has also challenged the jurisdiction of Ld. AO to reopen the proceedings for the year under consideration. However, the perusal of assessment order would reveal that the assessment has been framed u/s 143(3) only and there are no reassessment proceedings for the year under consideration. Therefore, finding no substance in legal ground, we dismiss the same.

None appeared for assessee. The assessee failed to appear even on last date of hearing also. Therefore, the matter was processed with on the basis of material on record and after hearing Ld. Sr. DR who pleaded for confirmation of estimated additions. We have carefully considered the material on record. Our adjudication to the appeal would be as given in succeeding paragraphs. 3.1 The assessee being resident corporate assessee is stated to be engaged in manufacturing of embroidered garments and motifs, wholesale and retail trading of fabric and garments. The assessee was assessed in scrutiny assessment u/s 143(3) on 29/03/2016. Pursuant to receipt of certain information from DCIT–CC-4(3), Mumbai, it was 3 Assessment Year 2013-14 alleged that the assessee had obtained bogus accommodation entries of bogus purchases aggregating to Rs.2,949.09 Lacs from 4 entities. The details of the same has already been extracted in Para 5.1 of the assessment order. The information was received consequent to search action u/s. 132 by DGIT(Inv.) in case of Balaji Group on 30/04/2013 wherein incriminating evidences were seized which indicated procurement of accommodation entries of bogus purchases. The entire bogus transactions were admitted by Shri Jagdish Mundra in his statement recorded u/s. 132(4). Accordingly, during the course of assessment proceedings, the assessee was directed to substantiate the purchase transactions. 3.2 Although the assessee filed copies of purchase bills, ledger accounts and bank statements evidencing payments through banking channels. However, notices issued u/s 133(6) to confirm the transactions were returned back un-served by postal authorities. The assessee failed to produce any of the suppliers for confirmation of accounts. The assessee also failed to file the complete details as noted by Ld.AO in Para 5.3 of the order. In the said background, a conclusion was drawn that the assessee failed to discharge the onus casted upon him to establish the genuineness of the purchases. Finally, Ld. AO estimated as addition of 12.5% against these purchases which resulted into an addition of Rs.368.63 Lacs in the hands of the assessee.

Although the assessee assailed the additions by way of elaborate written submissions, however, the same could not convince Ld. First appellate authority. After noticing the ratio laid down by Hon’ble Supreme Court in CIT V/s Durgaprasad More 82 ITR 540 as well as in Sumati Dayal V/s CIT 214 ITR 801, Ld. CIT(A) concurred with Ld. AO’s findings