ASSISTANT COMMISSIONER OF INCOME TAX 15(2)(1), MUMBAI vs. JYOTI SWITCHGEARS PRIVATE LIMITED, MUMBAI

During hearing, the assessee’s representative, vide adjournment letter dated 13/05/2019 sought adjournment in the matter, however, the same was rejected by the bench keeping in view the fact that the assessee failed to appear on first occasion whereas took adjournment on the second occasion. Accordingly, the appeal is heard ex-parte qua the assessee after appreciating the written submissions made by Ld. DR. 2.1 Facts on record reveal that the assessee was been assessed u/s 143(3) r.w.s. 147 on 20/02/2016 wherein the income has been determined at Rs.173.30 Lacs after disallowance of alleged bogus purchases for Rs.104.79 Lacs as against returned income of Rs.68.51 Lacs e-filed by the assessee on 01/10/2010 which was processed u/s 143(1). 2.2 The assessee being resident corporate assessee stated to be engaged in manufacturing of electrical goods was subjected to reassessment proceedings pursuant to receipt of certain information that the assessee was engaged in the practice of inflating the purchases through hawala parties. Accordingly, the case was reopened vide issue of notice u/s 148 dated 18/03/2015 which was followed by statutory notices u/s 143(2) & 142(1). 2.3 During assessment proceedings, it transpired that the assessee made aggregate purchases of Rs.104.79 Lacs from 11 suspicious dealers, the details of which have already been extracted in para 2 of the quantum assessment order. The statement made by these parties before Sales tax Authorities revealed that these parties were indulged in providing accommodation bills without carrying out any actual transfer of goods. To confirm the transactions, notices u/s 133(6) were issued to the suppliers, however, none appeared nor submitted any documentary evidences in support of legitimacy of their business. The same was confronted to the assessee. The assessment order, at para 2.5, record a finding that the assessee’s representative has shown inability to furnish the explanation and agreed for the addition. The failure on the part of the assessee to furnish satisfactory reply resulted into disallowance of aforesaid purchases. Accordingly, impugned additions of Rs.104.79 Lacs was made in the hands of the assessee. 3.1 Before Ld. CIT(A), the assessee, inter-alia, drew attention to the fact that the assessee submitted copies of invoices, delivery challans, ledger extracts, proof of payment etc. and therefore, the purchases could not be treated as bogus. However, it was noted that the challans numbers / invoices did not bear the vehicle number / transport details. The material on record as well as assessee’s submissions led the Ld. first appellate authority to form an opinion that the assessee failed to discharge the primary onus casted upon him to establish the genuineness of the transactions and the observations of Hon’ble Apex Court rendered in CIT Vs. Durgaprasad More 82 ITR 540 as well as Sumati Dayal Vs. CIT 214 ITR 801 was applicable to the factual matrix. 3.2 In the background of various decisions of higher judicial authorities, Ld. CIT(A) proceeded to estimate the addition on account of alleged bogus purchases in view of the fact that the sales were accepted and the addition of entire purchases would lead to absurd profits. Therefore, the addition was to be restricted to account for element of profit embedded in purchases which the assessee would have made by purchasing goods from some unknown entities. Finally, following the decision of Hon’ble Gujarat High Court rendered in CIT Vs. Simit P.Sheth [356 ITR 451] & CIT Vs. Bholanath Poly Fab. P. Ltd. [355 ITR 290], the impugned additions were restricted to 12.5% of alleged bogus purchases. Aggrieved, the revenue is in further appeal before us.

Upon careful consideration, we are of the considered opinion that there could be no sale without actual purchase of material keeping in view the assessee’s nature of business. The sales turnover was not disputed by the Ld. AO and the assessee was in possession of primary purchase documents viz. copies of invoices, delivery challans and the payments were through banking channels. Therefore, Ld. CIT(A), in our opinion, clinched the issue in right perspective and hence, would not require any interference on our part. We hold so.

Resultantly, the appeal stands dismissed. Order pronounced in the open court on 16/05/2019.