ITO - 27 (1)(4), MUMBAI vs. DEEPAK ENTERPRISES, MUMBAI

आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member):- 1. Aforesaid appeals by revenue for Assessment Years [AY] 2009-10 and 2010-11 contest separate orders of Ld. Commissioner of Income-Tax (Appeals)-24, Mumbai [in short referred to as ‘CIT(A)’] both dated -21/Mum/2018 Deepak Enterprises Assessment Years - 2009-10 & 2010-11 21/06/2018 on certain common grounds of appeal

1. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs.2,74,221/- made by the Assessing Officer on account of bogus purchases, without appreciating the fact that the assessee had failed to produce bills, vouchers and other documentary evidences in support of his claim and without considering the latest Apex Court decision in the case of N.K.Proteins Ltd. wherein it is held that once it is proved that the purchases are bogus then additions should be made on entire purchases and not on profit element embedded in such purchases.

2. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in estimating the profit from Hawala purchases by disallowing only Rs.1,91,025/- being 12.5% of the bogus purchases as even the basic onus of producing delivery challans, transport bills etc. were not fulfilled by the assessee.

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 2009-10 would reveal that the assessee being resident firm stated to be engaged in trading of surgical items and chemicals, was assessed for impugned AY u/s. 143(3) r.w.s. 147 on 30/03/2015 wherein the income of the assessee was determined at Rs.6.24 Lacs, after sole addition of alleged bogus purchases for Rs.4.65 Lacs as against returned income of Rs.1.58 Lacs e-filed by the assessee on 26/09/2009 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 -21/Mum/2018 Deepak Enterprises Assessment Years - 2009-10 & 2010-11 purchases bills amounting to Rs.15.28 Lacs from 10 entities, the details of which has already been extracted at para 5.1 of the quantum assessment order. Accordingly, the case was reopened as per due process of law vide issuance of notice u/s 148 on 31/03/2014 which was followed by statutory notices u/s 143(2) and 142(1) wherein the assessee was directed to substantiate the purchase transactions. 2.3 The assessee defended the purchases by furnishing details of purchases and corresponding sales, however, notices issued u/s 133(6) to all the suppliers remained un-responded to. One entity denied having carried out any transaction with the assessee. The assessee failed to produce any of the parties for confirmation of accounts. The assessee also failed to substantiate the delivery of material. The factual matrix led the Ld. AO to form an opinion that the purchases were not genuine. In the said background, Ld. AO worked out peak credit of Rs.3.92 Lacs in respect to 9 entities and added the same to the income of the assessee whereas full disallowance of Rs.0.72 Lacs was made with respect to purchases made from one entity, who denied having carried out any transaction with the assessee. Thus, total disallowance worked out to be Rs.4.65 Lacs as against disputed purchases of Rs.15.28 Lacs which translated into disallowance of purchases to the extent of 30.43% approx.