CAPITAL CONTROLS PRIVATE LIMITED (NOW KNOWN AS CAPCO WATER SOLLUTIONS PRIVATE LIMITED),MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX 9(2)(1), MUMBAI

By way of this appeal, the assessee contest the order of Ld. Commissioner of Income-Tax (Appeals)-16, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-16/IT-309/ACIT.9(2)(1)/2015-16 dated 25/10/2017 qua confirmation of certain additions on account of alleged bogus purchases. 3.1 Facts as emanating from quantum assessment order dated 19/03/2015 for AY 2009-10 are that the assessee being resident corporate entity stated to be engaged in production & trading of chlorinators was subjected to an assessment u/s 143(3) read with section 147. The income of the assessee was determined at Rs.226.52 Lacs after sole addition on account of alleged bogus purchases for Rs.111.27 Lacs as against returned income of Rs.115.25 Lacs filed by the assessee on 30/09/2009 which was processed u/s 143(1). 3.2 The reassessment proceedings got triggered pursuant to receipt of certain information from Sales Tax Department, Mumbai as well as DGIT (investigation), Mumbai that the assessee received accommodation entries of purchases aggregating to Rs.111.27 Lacs from 4 suspicious parties without obtaining any material / goods. Consequently, notice u/s 148 dated 04/03/2014 was issued to the assessee which was followed by statutory notices u/s 143(2) & 142(1). The details of suppliers from whom such entries are stated to have been procured by the assessee has already been extracted in para-4.1 of the quantum assessment order. Accordingly, the assessee was called to provide documentary evidences in respect of purchases made from 4 parties including delivery challans & copies of invoices.

3.3 Notices sent u/s 133(6) to various suppliers to confirm the transactions elicited no satisfactory response and none of the supplier responded to the same. The said fact was confronted to the assessee vide show-cause notice with a direction to substantiate the purchase transactions and delivery of material. Although the assessee defended the purchases by submitting that the purchases were genuine but failed to produce any of the party to confirm the transactions. The assessee also failed to provide any quantity wise tally of purchase & sale. Since the assessee, in the opinion of Ld. AO, failed to discharge the onus casted upon him to prove the purchases, disallowed the entire purchases. The stand of Ld. AO, upon confirmation by first appellate authority, is under challenge before us.

The Ld. Authorized Representative for Assessee [AR], drawing our attention to the documents placed in the paper-book, submitted that the assessee was in possession of primary purchase documents including delivery challans, loading charges paid vouchers & material receipt note and the payments to suppliers were through banking channels and therefore the disallowance was not justified. The Ld. DR submitted that the assessee failed to discharge the onus casted upon him to prove the genuineness of the purchases.

We have carefully heard the rival submissions and perused relevant material on record. After due consideration of factual matrix, 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 assessee was in possession of primary purchase documents including delivery challans and the payments to the various suppliers was through banking channels. The sales turnover achieved by the assessee has been accepted by the revenue. However, at the same time, the assessee failed to produce any of the parties to confirm the transactions and notices sent u/s 133(6) elicited no satisfactory response. The assessee failed to substantiate the purchase transactions with cogent documentary evidences. Under the given circumstances, the addition which could be made was to account for profit element embedded in these purchase transactions to factorize for profit element earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against alleged bogus purchases. Therefore, we estimate the impugned additions at 12.5% of alleged bogus purchases, which works out to Rs.13,90,940/-. The balance addition stands deleted. The appeal stands partly allowed. AY 2010-2011 6. In this year, the assessee has similarly been saddled with addition of Rs.59.24 Lacs on account of alleged bogus purchases. The first appellate authority has confirmed the stand of Ld. AO. Facts & circumstances, being pari-materia the same, taking the same view, we restrict the impugned additions to 12.5% of Rs.59,24,660/- which works out to be Rs.7,40,582/-. The appeal stands partly allowed. ITA No. 7435/Mum/2017, AY 2012-2013 7. In this year, the assessee is aggrieved by confirmation of certain additions u/s 68 for Rs.90.20 Lacs. The relevant facts are that during assessment proceedings, it transpired that the assessee obtained unsecured loans aggregating to Rs.90.20 Lacs from 5 parties, the details of which have already been extracted at para 4 of the quantum assessment order dated 13/03/2015. The same were added u/s 68 for want of requisite details / confirmations etc. Similar was the situation before Ld. first appellate authority, wherein the assessee again failed to substantiate the same with requisite documentary evidences.

The only plea raised by Ld. AR, before us, is that the assessee is in a position to substantiate the same and therefore, in the interest of justice, the matter may be restored back to the file of Ld. AO for re- adjudication. The Ld. DR pointed out that the assessee miserably failed to prove the same even during appellate proceedings.

Keeping in view the above submissions, in the interest of justice, we deem it fit to restore the matter back to the file of Ld. AO for re- adjudication after affording reasonable opportunity of being heard to the assessee, who, in turn, is directed to substantiate the transactions. The appeal stands partly allowed for statistical purposes. Conclusion 10. All the appeal stands partly allowed in terms of our above order. Order pronounced in the open court on 22nd March, 2019. Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांक Dated : 22/03/2019 Sr.PS, Jaisy Varghese आदेशकी�ितिलिपअ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकरआयु�(अपील) / The CIT(A) 3. आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड�फाईल / Guard File 6.