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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY
Aforesaid appeal has been filed by the assessee challenging the order dated 20th December 2017, passed by the learned Commissioner (Appeals)–2, Mumbai, for the assessment year 2011–12.
The dispute in the present appeal is confined to the addition of an amount of ` 5,04,000 on account of bogus purchases.
Brief facts are, the assessee, a partnership firm, is engaged in the business of manufacturing rubber products. For the assessment year under dispute, the assessee filed its return of income on 25th September 2011, declaring total income of ` 37,74,530. Subsequently,
2 Shree Rubber Works on the basis of information received from the Sales Tax Department, Government of Maharashtra, that the purchases of ` 5,04,000 made from M/s. L.P. Traders, are not genuine, since, the said party has been identified as a hawala operator providing accommodation bills to large number of parties, the Assessing Officer re–opened the assessment under section 147 of the Act. During the assessment proceedings, when the assessee was called upon to prove the genuineness of purchases made from the aforesaid party, the assessee filed its explanation stating that the purchases made are genuine. The Assessing Officer, however, did not find merit in the submissions of the assessee and treated the purchases made of ` 5,04,000, as non– genuine and accordingly added back to the income of the assessee under section 69C of the Act. Though, the assessee challenged the aforesaid addition before the learned Commissioner (Appeals), it was unsuccessful.
The learned Authorised Representative reiterating the stand taken before the Departmental Authorities submitted that the assessee in fact has effected the purchases from the concerned party. He submitted, the genuineness of purchase is proved from the fact that there is not much difference between the price paid by the assessee for purchasing similar type of item from M/s. L.P. Traders as well as other parties. He submitted, the assessee has shown a healthy gross
3 Shree Rubber Works profit rate of 21.20% in the impugned assessment year. Therefore, no addition should have been made on account of bogus purchases. However, ultimately, he submitted that 100% of the purchases cannot be treated as income of the assessee but only the profit element embedded in such purchases can be treated as income of the assessee.
The learned Departmental Representative relied upon the observations of the learned Commissioner (Appeals).
I have considered rival submissions and perused material on record. It is evident from the facts on record that the Assessing Officer had specific information in his possession to indicate that purchases made by the assessee from M/s. L.P. Traders, is not genuine as the said party was found to be a hawala operator providing accommodation bills only. The assessee has not furnished any conclusive evidence to prove the purchase of goods from M/s. L.P. Traders. That being the case, the purchases made by the assessee from the concerned party cannot be treated as genuine. However, it appears that the Departmental Authorities have not disputed assessee’s sales figures. Therefore, without such purchases being made, the assessee could not have effected the sales. In such circumstances, the presumption would be, the assessee might have purchased the goods from grey market by payment of cash to avoid
4 Shree Rubber Works levy of VAT and other taxes and to regularize such purchases, the assessee might have obtained the accommodation bills by making payment through banking channel. In these circumstances, only the profit element embedded in such purchases can be treated as the income of the assessee. Thus, considering the overall facts and circumstances of the case and keeping in view the decision taken by the Tribunal in such type of cases, I direct the Assessing Officer to sustain addition @ 12.5% of the bogus purchases of ` 5,04,000. Grounds are partly allowed.
In the result, assessee’s appeal is partly allowed. Order pronounced in the open Court on 19.09.2018