DCIT 10(3)(1), MUMBAI vs. NIVEDITA CHEMICALS P.LTD, MUMBAI

आयकरअपील सं./ (िनधा"रण वष" / Assessment Year: 2010-11) DCIT-10(3)(1) Nivedita Chemicals Pvt. Ltd. Room No.212, Aaykar Bhavan, G-32 बनाम/ M.K. Road Gems and Jewellery Complex-III Vs. Mumbai- 400 020. Seepz, Andheri (E) Mumbai- 400 096. "थायीलेखासं./जीआइआरसं./PAN/GIR No. AAACN-1799-L (अपीलाथ"/Appellant) (""थ" / Respondent) : & आयकरअपील सं./ (िनधा"रण वष" / Assessment Year: 2010-11) Nivedita Chemicals Pvt. Ltd. DCIT-10(3)(1) G-32 Room No.212, Aaykar बनाम/ Gems and Jewellery Complex-III Bhavan, M.K. Road Vs. Seepz, Andheri (E) Mumbai- 400 020. Mumbai- 400 096. "थायीलेखासं./जीआइआरसं./PAN/GIR No. AAACN-1799-L (अपीलाथ"/Appellant) (""थ" / Respondent) : Assessee by : Shri Anil Vishwakarma- Ld. AR Revenue by : Ms. Kavita P. Kaushik – Ld. DR सुनवाई की तारीख/ : 28/11/2019 Date of Hearing घोषणा की तारीख / : 28/11/2019 Date of Pronouncement Assessment Year :2010-11 M/s. Nivedita Chemicals P.Ltd. आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid cross-appeals for Assessment Year [in short referred to as ‘AY’] 2010-11 contest the order of Ld. Commissioner of Income-Tax (Appeals)-17, Mumbai, [in short referred to as ‘CIT(A)’] Appeal No. CIT(A)-17/IT-19710780/16-17 dated 18/05/2018. It is evident from grounds of appeal that the sole issue that arises for our consideration is addition on account of alleged bogus purchases.

2. We have carefully heard rival submissions, perused relevant material on record and deliberated on various judicial pronouncements being relied upon by both the representatives. 3.1 Facts on record would reveal that the assessee being resident corporate assessee stated to be engaged in trading of chemicals, was assessed for impugned AY u/s. 143(3) r.w.s. 147 on 23/12/2016 wherein the income of the assessee was determined at Rs.225.09 Lacs, after sole addition of alleged bogus purchases for Rs.102.57 Lacs as against returned income of Rs.122.52 Lacs e-filed by the assessee on 24/09/2010 which was processed u/s.143(1). 3.2 Pursuant to receipt of certain information from Sales Tax Department, Govt. of Maharashtra, it transpired that the assessee obtained bogus purchases bills amounting to Rs.102.57 Lacs from 3 suspicious entities, the details of which have already been extracted on Page-2 of the quantum assessment order. Accordingly, the case was reopened as per due process of law vide issuance of notice u/s 148 on Assessment Year :2010-11 M/s. Nivedita Chemicals P.Ltd. 30/03/2016 which was followed by statutory notices u/s 143(2) and 142(1) wherein the assessee was directed to substantiate the purchase transactions. 3.3 The assessee defended the purchases by furnishing copies of purchase invoices, delivery challans, bank statements showing payment to suppliers through banking channels. However, it was noted by Ld. AO that the assessee was not following any standard operating procedure to make the purchases and failed to substantiate the delivery of material. Notices issues u/s 133(6) to 3 suppliers, to confirm the transactions, were returned undelivered by the postal authorities. The assessee failed to produce any of the suppliers but relied on the documents furnished in support of the purchase transactions. Finally, not satisfied with assessee’s submissions / explanations, the stated purchases were treated as bogus transactions and added to the income of the assessee.

4. The learned CIT(A), after weighing the factual matrix in terms of ratio of various judicial pronouncements, came to a conclusion that assessee had inflated expenses by taking bogus bills from hawala dealers. However, entire additions would not be justified rather the additions were to be estimated @25% of these purchases. The adjudication by learned first appellate authority has given rise to cross- appeals before us.

5. After careful consideration of orders of lower authorities and after appreciating the arguments advanced by respective representatives, we are of the considered opinion that there could be no sale without actual purchase of material keeping in view the assessee’s nature of business i.e. trading. Undisputedly the assessee was in possession of primary Assessment Year :2010-11 M/s. Nivedita Chemicals P.Ltd. purchase documents and the payments to the suppliers were through banking channels. The assessee was a corporate entity and its books of accounts were subjected to audit under various statutes. However, at the same time, the assessee miserably failed to substantiate the delivery of material and also failed to produce any of the suppliers to confirm the transactions. The onus casted upon assessee, in this regard, remained undischarged.

6. The stated factual matrix, in our considered opinion, would make it a fit case not to disallow entire purchases but the addition, which could be sustained, would be to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which learned first appellate authority has rightly done so. However, the estimation of 25%, in our opinion, would be on the higher side. Therefore, we restrict the same to 12.5% of alleged bogus purchases of Rs.1,02,57,688/- which comes to Rs.12,82,211/-. The impugned order stand modified to that extent.

7. Resultantly, the assessee’s appeal stands partly allowed whereas the revenue’s appeal stands dismissed. Order pronounced in the open court on 28th November, 2019. (Mahavir Singh) (Manoj Kumar Aggarwal) "ाियक सद" / Judicial Member लेखा सद" / Accountant Member मुंबई Mumbai; िदनांक Dated : 28/11/2019 Sr.PS, Jaisy Varghese आदेशकी"ितिलिपअ"ेिषत/Copy of the Order forwarded to : Assessment Year :2010-11 M/s. Nivedita Chemicals P.Ltd. अपीलाथ"/ The Appellant 1. ""थ"/ The Respondent 2. आयकरआयु"(अपील) / The CIT(A) 3. आयकरआयु"/ CIT– concerned 4. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड"फाईल / Guard File 6. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.