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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 appeals by revenue for Assessment Year [AY] 2011-12 contest the order of Ld. Commissioner of Income-Tax (Appeals)-2, Thane,
Sachin Ramesh Behare [in short referred to as ‘CIT(A)’], dated 27/06/2018 on following grounds of appeal: - “1. Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A) was justified in not appreciating the law correctly that once the purchases are unverifiable/not genuine/ bogus, the sarae should have been disallowed in entirety?
2. Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A) was justified in restricting the disallowance to 28.21% of the bogus purchases despite the fact that even during appellate/proceedings the assessee failed to substantiate the genuineness of the purchases with supporting documentary evidences (para 6.2 on page(6) of order of CIT(A). 3.Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A) was justified in restricting the disallowance to 28.21% of the bogus purchases despite the fact that even during the appellate proceedings the assessee failed to substantiate the physical delivery of the goods with supporting documentary evidences (para 6.2 on page(6) of order of CIT(A).
4. Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A) was justified in restricting the disallowance to 28.21% of the bogus purchases despite the fact that even during the appellate proceedings the assessee failed to reconcile the quantitywise details of purchases from the hawala parties visa-a-visa sales thereof (para 6.2 on page(6) of order of CIT(A)).
We have heard and considered the arguments advanced by both the sides. 2.1 Facts on record would reveal that the assessee being resident individual stated to be engaged in the business of interior decoration was assessed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 on 11/03/2016 wherein the assessee was saddled with additions of Rs.9.77 Lacs on account of alleged bogus purchases. Pursuant to receipt of certain information, it transpired the assessee made purchases of Rs.9.77 Lacs from 3 suspicious entities, the details of which has already been extracted at para-5.1 of the quantum assessment order. Accordingly, as per due process of law, the case was reopened vide issuance of notice u/s 148 on Sachin Ramesh Behare 28/07/2014 followed by statutory notices u/s 143(2) & 142(1), wherein the assessee was directed to substantiate the purchases. 2.2 Although the assessee defended the purchases, the assessee could not produce any of the suppliers to confirm the transactions. Finding that the assessee remained unsuccessful in discharging the primary onus, the stated purchases were disallowed and added to the income of the assessee. The learned first appellate authority restricted the additions to 28.21% of alleged bogus purchases, being Gross profit Rate reflected by the assessee during the year. Aggrieved, the revenue is in further appeal before us. It appears that the assessee has not preferred any further appeal.
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. The assessee was in possession of primary purchases 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 produce 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 authority
Sachin Ramesh Behare in restricting the additions to the extent of Gross Profit Rate reflected by the assessee, we dismiss the appeal. 4. In result, the appeal stands dismissed. Order pronounced in the open court on 16th September, 2019. Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member