MULTIPLE IMAGES,MUMBAI vs. ITO -WD- 21 (2)(3), MUMBAI

आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member):- 1. Aforesaid appeals by assessee for Assessment Years [AY] 2010-11 and 2011-12 contest separate orders of Ld. Commissioner of Income-Tax (Appeals)-1, Mumbai [in short referred to as ‘CIT(A)’] dated 16/08/2018 & -22/Mum/2018 Multiple Images Assessment Years - 2010-11 & 2011-12 28/08/2018 on certain common grounds of appeal

1. The Ld. CIT (A) erred in confirming the action of Ld. AO in making addition of Rs.5,59,317/- being 25% of alleged bogus purchases without appreciating the facts and circumstances of the case. Thus, the addition of Rs.5,59,317/- made is unjustified and the same may be deleted.

2. The Ld. CIT (A) failed to appreciate that the purchases made during the year were duly reflected in the books of accounts of the Appellant and the same were supported with proper documentary evidences. Thus, the addition of Rs.5,59,317/- on account of alleged bogus purchases is unjustified and the same may be deleted. We have heard and considered the arguments advanced by both the representatives and deliberated on judicial pronouncements as cited before us. 2.1 Facts from records of AY 2010-11 would reveal that the assessee being resident firm stated to be engaged in printing work, was assessed for impugned AY u/s. 143(3) r.w.s. 147 on 24/11/2016 wherein the income of the assessee was determined at Rs.22.06 Lacs, after sole addition of alleged bogus purchases for Rs.5.59 Lacs as against returned income of Rs.16.47 Lacs filed by the assessee on 24/09/2010 which was initially processed u/s.143(1). 2.2 Pursuant to receipt of certain information from Sales tax Department, Govt. of Maharashtra, it transpired that the assessee obtained bogus purchase bills aggregating to Rs.22.37 Lacs from 6 entities, the details of which have already been extracted at para-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 29/03/2016 which was followed by statutory ITA No.5421-22/Mum/2018 Multiple Images Assessment Years - 2010-11 & 2011-12 notices u/s 143(2) & 142(1) wherein the assessee was directed to substantiate the purchase transactions. The reasons recorded for reopening the assessment were supplied in due course of time. 2.3 Although the assessee defended the purchases by submitting ledger extracts, purchase invoices, bank statement evidencing payment to suppliers through banking channels, however, notices issued u/s 133(6) to all the entities were returned back unserved. The assessee failed to provide the whereabouts of the suppliers and also failed to produce any of the suppliers for confirmation of transactions. Since the assessee failed to discharge the onus of substantiating the purchases, Ld. AO, inter-alia, relying upon the decisions of Hon’ble Gujarat High Court rendered in CIT V/s Simit P.Sheth 356 ITR 451 and CIT V/s Bholanath Poly Fab Pvt Ltd. of 2012 23/10/2012, estimated the additions @25% of disputed purchases. The same resulted into an addition of Rs.5.59 Lacs in the hands of the assessee. The stand of Ld. AO, upon confirmation by learned first appellate authority, is under challenge before us.

3. After careful consideration of orders of lower authorities and after appreciating the arguments advanced by respective representatives, we are of the considered opinion there could be no sale without actual purchase of material keeping in view the assessee’s nature of business. Undisputedly the assessee was in possession of primary purchase documents and the payments to the supplier was through banking channels. However, at the same time, the assessee miserably failed to substantiate the delivery of material during assessment as well as appellate proceedings. The -22/Mum/2018 Multiple Images Assessment Years - 2010-11 & 2011-12 assessee failed to produce any of the suppliers to confirm the transactions and the onus casted upon assessee, in this regard, remained undischarged. Notices issued u/s 133(6) elicited no satisfactory response. Under such circumstances, the additions which could be sustained, was 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 lower authorities have rightly done so. Therefore, finding no infirmity in the same, we dismiss the appeal.

Order pronounced in the open court on 10th October, 2019.