ITO 27(1)(4), MUMBAI vs. M/S EXCELL TECH SYSTEMS, MUMBAI

These two appeals by the Revenue are directed against orders of the Commissioner of Income Tax(Appeals)-24, Mumbai (in short ‘CIT(A)) for the assessment year 2010-11 and 2011-12, respectively. Both the impugned orders are of even date i.e. 26/10/2018. Since the facts in both the assessment

Notice of appeals was sent to the assessee/respondent through RPAD. The acknowledgement available on record indicates that the notice has been duly served. Despite service of notice, neither any Authorized Representative of the assessee has appeared nor any letter seeking adjournment, on behalf of the assessee has been received. It appears that the assessee is not keen to contest the appeals. Under such circumstances, we proceed to decide the appeals with the assistance of ld.Departmental Representative and the material available on record.

For the sake of convenience, the facts are extracted from the appeal of the Revenue for assessment year 2010-11. The assessee is engaged in manufacturing of Ultrasonic Cleaning Machines. The Assessing Officer on the basis of information received from Investigation Wing of the Department reopened the assessment. As per information received, the assessee had obtained bogus purchase bills from various hawala dealers. During the period relevant to the assessment year under appeal, the assessee had procured bogus purchase bills amounting to Rs.18,84,512/-. The Assessing Officer made addition of the entire alleged bogus purchases. Aggrieved against the assessment order dated 19/01/2016, passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short ‘the Act’), the assessee filed appeal before CIT(A). The first appellate authority after considering the facts of the case and 3 आ अ सं. (A.Y.2010-11) आ अ सं. ITA NO.420/MUM/2019(A.Y.2011-12)

Shri R. Bhoopathi, representing the Department submitted that during the assessment proceedings, the assessee failed to produce the vendors from whom the assessee had allegedly purchased raw materials used in the manufacturing. The assessee could not prove genuineness of the purchases made, hence, the Assessing Officer made addition of the entire bogus purchases.

I have heard the submissions made by ld.Departmental Representative and have examined the material available on record. The addition has been made by Assessing Officer on the basis of information received from Investigation Wing that the assessee has indulged in obtaining bogus purchase bills. The sales declared by the assessee have not been disputed by the Revenue. Without purchases there cannot be manufacturing of goods by the assessee. Thus, entire alleged bogus purchases cannot be added. It is only the profit element embedded in unproved purchases that can be brought to tax. The CIT(A) has restricted the disallowance to 12.5% of the disputed bogus purchases in line with the decision of Hon'ble Gujarat High Court in the case of Simit P. Sheth(supra). We do not find any infirmity in the order of first appellate authority. Accordingly, the same is upheld and the appeal of the Revenue is dismissed being devoid of any merit.

In the result, both the appeal by the Revenue are dismissed.