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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: HON’BLE SHRI MAHAVIR SINGH, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R
Per Bench: -
Aforesaid appeal by revenue for Assessment Year [AY] 201-011 contest the order of Ld. Commissioner of Income-Tax (Appeals)-56, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-
Homa Engineering Works 56/Addl.CIT(Range)-13(1)/2017-18 dated 25/06/2018 on following grounds of appeal: -
1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in reducing the disallowance at 14.08% as against 100% adopted by the A.O. in respect of bogus purchases.”
Keeping in view the subject matter of the appeal, the adjournment application filed by the assessee was rejected by the bench.
2.1 Facts on record would reveal that the assessee being resident firm stated to be engaged as contractors was assessed u/s 143(3) of the Income Tax Act, 1961 on 28/03/2013 wherein the assessee was saddled with additions of Rs.20.85 Lacs on account of alleged bogus purchases. During assessment proceedings, it transpired that the assessee made aggregate purchases of Rs.20.85 Lacs from 7 entities, the details of which have already been extracted at para-4.1 of the quantum assessment order. These parties, as per information from Sales Tax Department, Maharashtra, were suspicious dealers who issued false bills without actual delivery of goods. The assessee failed to provide the whereabouts of the parties. The statement u/s 131 was recorded from director of the assessee company. Although the assessee defended the purchases, however, finding discrepancies in the documentary evidences and relying upon the investigation carried out by the Sales Tax Department, the aforesaid purchases were treated as bogus purchases and added to the income of the assessee.
2.2 The first appellate authority, inter-alia, relying upon various judicial precedents, restricted the impugned additions to 14.08%, being the Gross Profit rate reflected by the assessee. Aggrieved, the revenue is in further appeal before us. It appears that the assessee has not appealed any further. We have heard and considered the submissions made by Ld. DR.
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. It transpires that the assessee was in possession of primary purchase documents and the payments to suppliers were through banking channels. The sales turnover reflected by the assessee has not been disturbed / disputed by Ld. AO. However, at the same time, the assessee miserably failed to prove the delivery of material and could not provide whereabouts of any of the supplier. 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 Ld. first appellate authority has rightly done. Therefore, concurring with the approach of learned first appellate
Homa Engineering Works authority in restricting the additions to the extent of Gross Profit Rate reflected by the assessee, we dismiss the appeal.
In result, the appeal stands dismissed.