DCIT - CIRCLE - 2, THANE vs. TEAM ENGINEERS PVT. LTD., THANE

आदेश / O R D E R

Per Bench: -

Team Engineers Private Limited Thane [in short referred to as ‘CIT(A)’], dated 26/06/2018 on following grounds of appeal: -

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 same 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) has erred in law by not appreciating the fact that the assessee could not establish the genuineness of the purchases from the non-existent vendors? 3. Whether on the facts and in the circumstances of the case and in law, the Ld, CIT(A) has erred in law by not appreciating the fact that the onus to justify the claim of expenses is on the assessee and the same has failed to discharge it in relation to the purchases made from the non-existent vendors? 4. Whether on the facts and in the circumstances of the case and in law, the Ld. C1T(A) has erred in law by ignoring, the fact that the assessee could not substantiate its claim of purchases from non-existent vendors by means of relevant supporting documents related to movement and delivery of goods, stock register, etc. to arrive at disallowance at 50% of the purchases from the non-existent vendors? 5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has was justified in not appreciating the law correctly that once the purchases are unverifiable / not genuine / bogus, the same should have disallowed in entirety, particularly in view of the ratio of the decision of the Hon'ble Gujarat High Court in Tax Appeal No. 242 of 2003 dated 20/06/2016 in the case of N. K. Proteins Ltd. against which the SLP was dismissed by the Hon'ble Apex Court?. We have heard and considered the arguments advanced by both the representatives. 2.1 Facts on record would reveal that the assessee being resident corporate assessee stated to be engaged as engineers & contractors was assessed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 on 27/10/2014 wherein the assessee was saddled with additions of Rs.3.28 Lacs on account of alleged bogus purchases. Pursuant to receipt of certain information, it transpired the assessee made purchases of Rs.3.28 Lacs from 2 entities, the details of which has already been extracted in the quantum assessment order. Accordingly, as per due process of law, the case was reopened vide issuance of notice u/s 148 on 19/07/2013 followed Team Engineers Private Limited 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, however, notices issued u/s 133(6) to both the suppliers remained un-served as well un- responded to. The assessee also failed to produce any of the supplier to confirm the transactions. Resultantly, these purchases were disallowed and added to the income of the assessee. The learned first appellate authority, finding that corresponding sales were made by the assessee, restricted the impugned additions to 50%. Aggrieved, the revenue is in further appeal before us. It appears that the assessee has not preferred any further appeal.

3. 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 provided corresponding sales made against these purchases. 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 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 Team Engineers Private Limited approach of learned first appellate authority in restricting the additions to the extent of 50%, 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