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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI R.C. SHARMA, HONBLE & SHRI C.N. PRASAD, HONBLE
O R D E R PER C.N. PRASAD (JM) 1. This appeal is filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals) – 51, Mumbai dated 01.01.2018 for the Assessment Year 2010-11. The only issue in the appeal of the assessee is in respect of addition of ₹.52,033/- made towards bogus purchases u/s. 69C of the Act.
In spite of issue of notice none appeared on behalf of the assessee. The notice was sent through RPAD to the address given in Form No.36
(A.Y: 2010-11) M/s. Rachana Card Manufacturing Company by the assessee returned unserved with an endorsement “Left” by the postal authorities. Since the notice issued was returned unserved, we dispose off this appeal on merits on hearing the Ld.DR.
Ld. DR submitted that, the Assessing Officer while completing the assessment treated the purchases of ₹.52,028/- as bogus and brought to tax u/s. 69C of the Act, based on the information received from the DGIT(Inv.) Wing, Sales Tax Department, Mumbai, that some of the dealers are indulged in providing accommodation entries and the seller M/s. Hiten Enterprises is one of the entity providing accommodation bills from whom the assessee purchased materials. It is submitted that in the course of the assessment proceedings notice u/s. 133(6) was issued but same was returned unserved with remarks “not known” or “no such address”. It is submitted that the assessee could not produce the party. However, copies of the invoices, copy of bank statements were furnished to establish that the assessee purchased plastic sticks and Knob from the supplier and claimed to have sold the finished product “wedding and other cards” to different parties. Since assessee did not produce the supplier and no stock register was maintained, the Assessing Officer added the entire purchases as bogus and brought to tax. It is submitted that the Ld.CIT(A) sustained the addition as the notice issued u/s. 133(6) to the (A.Y: 2010-11) M/s. Rachana Card Manufacturing Company party was returned and the assessee could not demonstrated that the said materials have been consumed by it.
We have heard the Ld. DR and perused the orders of the Authorities below. On a perusal of the Assessment Order, we find that the addition was made based on the information received from the DGIT(Inv.), Sales Tax Department, Mumbai, that certain dealers were providing only accommodation entries. This was confronted to the assessee and the assessee submitted that the transactions are genuine. Assessee filed copies of invoices and the copies of bank statement to prove that the purchases were made through cheques. We noticed that the notice u/s.133(6) sent to the supplier by the Assessing Officer was returned unserved and it is stated that no stock register was maintained and the assessee could not show the consumption of material and therefore the Assessing Officer was of the view that the purchases were non-genuine. The lower authorities have not doubted the sales made by the assessee, without there being purchases there cannot be any sales. Further, the Hon'ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd [355 ITR 290] held that when the assessee made purchases and sold the finished goods as a natural corollary not the entire amount covered under such purchases would be subject to tax but only the profit element embedded therein. Similar view has been taken by the Hon'ble Gujarat
(A.Y: 2010-11) M/s. Rachana Card Manufacturing Company High Court in the case of CIT v. Simit P. Seth [38 taxman.com 385]. Simply because the parties were not produced the entire purchases cannot be added as held by the Bombay High Court in the case of CIT v. Nikunj Eximp [216 Taxman.com 171]. Thus, following the above decision of the Hon'ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd (supra), we direct the Assessing Officer to restrict the disallowance to 12.5% of the purchases treated as non-genuine by estimating profit element in such bogus purchases.
In the result appeal of the assessee is partly allowed.
Order pronounced in the open court on the 03rd August, 2018