ITO 19 (1)(1), MUMBAI vs. ANKIT M. DOSHI, MUMBAI

In this appeal, the revenue is aggrieved by the action of the ld. CIT(A) for deleting the addition on account of bogus purchases made by the A.O.

I have heard the rival contentions of both the parties and perused the material available on record as well as the orders of the ITO Vs Shri Ankit M Doshi authorities below and found from the record that the assessment was reopened as per information received from the Sales Tax Department regarding bogus purchase bill taking by the assessee. The A.O. made detailed enquiry with regard to genuineness of the purchases and concluded the same as per para 8 page 5 of his order. The A.O. observed that the independent enquiries/investigations were carried out by this office u/s 133(6) of the Act but in all the cases, the notices sent to the suppliers were returned unserved with the remark either “left”, “not traceable”, “not known” etc. The A.O. further observed that the assessee was asked to produce the said parties from whom such purchases claimed to have been made for examination but the assessee failed to do so. However, the addition so made by the A.O. by estimating profit at 12.5% from alleged bogus purchases were deleted by the ld. CIT(A) after observing as under:

“7.2 On going through the annexures attached to the VAT Audit Report (Form 704), it is seen that Annexure J relates to customer wise VAT sales. Sr. No. 96 of Annexure J reflects that an amount of Rs. 66,450/- has been paid by the seller viz M/s Ananddeep Metal towards VAT for the sales made to M/s Ryan Impex of Rs. 17,27,700/-. It is also mentioned in the proprietor of M/s Ryan Impex expired on 02/07/2010, copy of the death certificate dated 12/11/2010 was furnished. Therefore, the appellant could not have produced the supplier before the A.O. during the assessment proceedings. After weighing the evidence of pros and cons, I am of the opinion that the appellant has mitigated the shadow of doubt

Against the above order of the ld. CIT(A), the revenue is in further appeal before the ITAT. It was vehemently argued by Shri Kumar Padmapani Bora, Sr.DR that the assessee could not produce any evidence during the course of assessment proceedings so as to prove the genuineness of the purchases. The ld. Sr.DR Shri Kumar Padmapani Bora also invited our attention to the fact that even the notices issued U/s 133(6) to the respective suppliers were returned unserved with the remark either “left”, “not traceable”, “not known” etc. As per the ld Sr.DR even the A.O. asked the assessee to produce the suppliers for examination but the assessee grossly failed to produce them. As per the ld. Sr. DR even the assessee could not file valid documents to prove the genuineness of purchases, like delivery challans, transport receipts, goods inward register maintained at godown. Under these facts and circumstances, as per the ld. Sr. DR, the A.O. has very reasonably estimated only 12.5% on such bogus purchases rather than making 100% addition. He further argued that without controverting the detailed findings of the A.O. recorded at page 3, para 8, the ld. CIT(A) has deleted the addition just by stating

On the other hand, the ld AR of the assessee has contended that the proprietor of supplier firm was expired, therefore, he could not be produced before the A.O. and his death certificate was also filed before the A.O. but the A.O. did not mention the same in his order. He further contended that as per Annexure-J, the customer wise VAT sales and the VAT paid thereon was duly filed before the lower authorities to prove the genuineness of the sales made by M/s Ananddeep Metal for the sales made to the assessee. The ld AR further defended the order passed by the ld. CIT(A) for deleting the entire addition made by the A.O. by estimating the profit at 12.5% on such alleged bogus purchases.

I have gone through the orders of the authorities below and considered the contention of ld. Sr.DR and ld. AR. I found that the ld. CIT(A) has deleted the entire addition without controverting detailed findings so recorded by the A.O. to the effect that the notice issued to the alleged party was returned unserved and even the assessee could not produce the party for examination. These findings of A.O. are at ITO Vs Shri Ankit M Doshi page 3 para 8 of his order. Under these facts and circumstances, the ld. CIT(A) was not justified in deleting the entire addition just by observing that the assessee has mitigated the shadow of doubt cast upon him and proved the genuineness of the transaction from the said party by producing copy of VAT audit report. Accordingly, I am in agreement with the ld. Sr.DR Shri Kumar Padmapani Bora that without controverting the specific findings of the A.O., the ld. CIT(A) was not justified in deleting entire addition made on account of bogus purchases. Accordingly, I modify the order of the lower authorities and keeping in view the totality of facts and circumstances of the case, I uphold addition to the extent of 5% of the alleged bogus purchases.

In the result, appeal of the revenue is allowed in part.