ITO-6(3)(1), MUMBAI vs. FANATIC FASHION PVT. LTD, MUMBAI

O R D E R PER R.C. SHARMA, ACCOUNTANT MEMBER

This appeal filed by the revenue against the order of CIT(A) for the A.Y.2010-11 in the matter of order passed u/s.143(3) of the Income Tax Act, 1961.

M/s. Fanatic Fashion Pvt. Ltd.

“4.2 I have considered the assessment order and the submissions of the appellant including the case laws cited. The AO on account of non- availability of the suppliers at the given address and non- production of transportation bills, added 100% of the said suspicious purchases. However the assessee filed copies of purchase invoices, ledger accounts of the parties in assessee's accounts and bank statement showing the payments and also invoices of corresponding sales. It is seen that many Benches of ITAT and Hon'ble High Courts in such circumstances have held that when purchases are supported by sufficient documentary evidences, then because of non-appearance before the AO, one cannot conclude that the purchases were not made by the assessee. Reliance is placed on Nikunj Eximp Enterprises (P.) Ltd. v. CIT 216 Taxman 171 (Bom.), CIT v. Nangalia Fabrics (P.) Ltd. 220 Taxmann 17 (Guj.), CIT v. M.K. Bros. 163 ITR 249 (Guj.), Asstt.CIT v. Akruti Dyeing & Printing Mills (P.)Ltd. Dy. CIT v. Adinath Industries [2001] 252 ITR 476 (Guj), CIT v. Precious Jewels Corpn.17 taxmann.com 264 (Raj.), CIT v. Rajesh P. Soni [Tax Appeal No.1107 of 2006, dated 27-2-2012.]. 4.3 However, fact remains that the appellant produced bank account statement, purchase bills, etc., to prove the genuineness of the purchases. It is also a fact on record that the Assessing Officer has not doubted the sales affected by the appellant. Thus, it is logical to conclude that without corresponding purchases being affected, the appellant could not have made the sales. Merely relying upon the information from the Sales Tax Department the Assessing Officer could not have treated the purchases as bogus. The appellant has brought documentary evidences on record to prove genuineness of such transactions, the action of the Assessing Officer in ignoring them cannot be accepted. When the payment to the concerned parties are through proper banking channel and there is no evidence before the AO that the payments made were again routed back to the appellant, the addition of bogus purchases is not sustainable in law and facts. Only corollary that follows in such situation is that the appellant could have obtained the accommodation bills for the material purchased locally. In other words the entities may not be the actual supplier but may have provided the bills for the material purchased locally. This is not case in which the signed blank cheque books etc. found with the buyer to say that the purchases of material were not at all made but entered in the stock to inflate the raw material. Therefore the decision of the Supreme Court in the case of N K Proteins Ltd 250 taxman 0022(SC) would not apply to the case. Therefore the saving on account of VAT other incidental charges made by the appellant on the said bogus purchases can be brought to tax as additional profit. Keeping in view the totality of facts and circumstances of the case, the disallowance made by the AO is restricted to 12.5% of such purchases. Therefore, the AO is directed to estimate the 12.5% of Rs.1,61,450 and modify the addition accordingly. Appellant gets part relief. This ground is partly allowed.”

M/s. Fanatic Fashion Pvt. Ltd.

Order pronounced in the open court on this 28/01/2020