PARSONS OVERSEAS,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX 21 (2), MUMBAI

These cross appeals are filed by the assessee and revenue against the order of the Ld. Commissioner of Income-tax (Appeals)-33, Mumbai [hereinafter for short "Ld. CIT(A)] dated 02.08.2017 for the A.Y. 2012-13 in partly sustaining the disallowance made toward alleged bogus purchases.

Briefly stated the facts are, assessee who is engaged in the business of export of readymade garments filed its return of income on 30.09.2012 declaring income of ₹.28,96,046/-. Return was processed U/s. 143(1) of the Act and the assessment was completed on 31.03.2015 U/s. 143(3) of the Act. In the course of the assessment proceedings to verify the genuineness of the purchases made by the assessee from various parties as mentioned in Para No. 6 of the assessment order the Assessing Officer issued notices U/s. 133(6) of the Act. It is the finding of the Assessing Officer that some of the notices were returned back unserved and in some of the cases there was no reply from the parties. Show-cause notice was issued to the assessee to explain genuineness of the transactions. Assessee submitted explanations along with evidences through various letters dated 19.03.2015, 24.03.2015 and 25.03.2015 to 3 ITA.NO. 6705 & 6477/MUM/2017 (A.Y: 2012-13) M/s. Parsons Overseas prove the genuineness of the purchases made. Not convinced with the submissions and evidences furnished by the assessee, the Assessing Officer added the entire purchases made from seven parties as referred to in the assessment order as non-genuine for the reason that the parties have not responded in some cases and notices were returned in some cases. When the matter was carried before the Ld. CIT(A), the assessee furnished further more details and made elaborate submissions to prove the genuineness of the purchases made by the assessee. However, the Ld. CIT(A) sustained the disallowance to the extent of @25% of the alleged bogus purchases on the ground that either the purchases from the above parties are over invoiced or the purchases were actually made not from the said parties but from gray market without proper billing or documentation.

Before us, Ld. Counsel for the assessee submitted that the Assessing Officer completely ignored the evidences furnished by the assessee in respect of all these parties and the purchases were added only for the reason that the notices were either returned or there was no reply from the parties. Ld. Counsel for the assessee submits that in the course of the assessment proceedings by letters 19.03.2015, 23.03.2015 24.03.2015 and 25.03.2015 the assessee furnished evidences in the form of replies furnished by parties directly to the Assessing Officer,

Ld. Counsel for the assessee further submitted that for the immediately subsequent assessment year i.e. A.Y. 2013-14 in the scrutiny assessment proceedings the Assessing Officer has examined the transactions with the very same parties and accepted that the parties are in existence, transactions are genuine and no disallowance was made in respect of the purchases made from all those parties while completing the assessment U/s. 143(3) of the Act on 09.11.2016. Ld. Counsel for the assessee submits that even for the A.Y.2014-15 no such disallowances were made by the Assessing Officer. While completing the assessment

On the other hand, Ld. DR strongly supported the orders of the authorities below.

We have heard the rival submissions and perused the orders of the authorities below. On a perusal of the assessment order, we find that the Assessing Officer treated the purchases made from seven parties as 6 ITA.NO. 6705 & 6477/MUM/2017 (A.Y: 2012-13) M/s. Parsons Overseas non-genuine solely for the reason that the notices issued U/s. 133(6) of the Act were either returned or the parties have not responded. The evidences produced before us clearly shows that the assessee has produced various information’s in the course of the assessment proceedings to prove the genuineness of the purchases. The assessee has furnished confirmations of accounts, replies furnished by the parties directly to the Assessing Officer, copies of PAN Cards, acknowledgement of filing returns of income, statements of accounts of the assessee in the books of parties etc., and none of these evidences were considered by the Assessing Officer. Even before the Ld. CIT(A) the assessee furnished all these evidences. Assessee also furnished various further more evidences to prove the existences of the parties, genuineness of the parties. We observe from the order of the Ld. CIT(A) that the Ld. CIT(A) on examining all these evidences, records a finding that the facts and circumstances clearly states that the extent of purchases shown in the names of the parties mentioned in the Assessment Order cannot be doubted. We observe from the order of the Ld.CIT(A) that having said that these purchases cannot be doubted the Ld. CIT(A) goes on to record a finding that in his view either purchases from the above mentioned parties are over invoiced or they were purchased from gray market without proper bills which is not the case of the assessee. We observe that if the 7 ITA.NO. 6705 & 6477/MUM/2017 (A.Y: 2012-13) M/s. Parsons Overseas Ld. CIT(A) was of such view he could have called for remand report from the Assessing Officer as there is sufficient evidences even according to him not to doubt the purchases made by the assessee. Thus, the reasoning given by the Ld. CIT(A) in sustaining @25% of the bogus purchases on adhoc basis is baseless.

We also find that the assessee has furnished various information and evidences in the course of the assessment proceedings for the A.Y.2013-14 in respect of the very same parties and the Assessing Officer has accepted the transactions with these parties as genuine. In such circumstances, we do not see any reason to hold that these purchases were non-genuine for the year under consideration. There is sufficient evidence on record to prove that the purchases made by the assessee from all these parties are genuine. Simply because the parties not responded and notices were returned unserved the transactions cannot be treated as non-genuine ignoring all the evidences furnished by the assessee. In these circumstances, we reverse the order of the Ld.CIT(A) and direct the Assessing Officer to delete the addition made towards bogus purchases. Grounds raised by the assessee are allowed.

In the result, appeal of the assessee is allowed and appeal of the Revenue is dismissed.