CLEAN ENGINEERING PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER, WARD 1(1), MUMBAI

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ITA 384/MUM/2018Status: DisposedITAT Mumbai25 April 2018AY 2011-125 pages
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What did the Tribunal hold?

The Tribunal held that while the purchases were not genuine, the entire amount could not be added to the income as the sales made by the assessee were not disputed. Following the ratio of CIT vs. Simit P. Sheth, the addition was restricted to 12.5% of the bogus purchases.

What were the facts?

The assessee claimed purchases of Rs. 16,15,950/- from certain entities. The AO, based on information from the Sales Tax Department and independent investigation, found these purchases to be bogus as the assessee failed to provide supporting documents like transportation bills and delivery challans.

What were the issues?

Whether the entire amount of bogus purchases can be added to the assessee's income when sales are not disputed? What is the appropriate method to ascertain the profit embedded in bogus purchases?

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148,Section 133(6)

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Income Tax Appellate Tribunal, MUMBAI BENCHES “SMC”, MUMBAI

Before: SHRI G.S. PANNU (AM) & SHRI RAM LAL NEGI (JM)

For Appellant: Shri Devendra Jain (AR)
For Respondent: Ms. N. Hemalatha (Sr. DR)
Hearing: 12/04/2018Pronounced: 25/04/2018

O R D E R

PER RAM LAL NEGI, JM

1.

This appeal has been filed by the assessee against the order dated 14.09.2017 passed by the Ld. Commissioner of Income Tax (Appeals)-2, Pune, for the assessment year 2011-12, whereby the Ld. CIT (A) has dismissed the appeal filed by the assessee against assessment order passed u/s 143 (3) read with section 147 of the Income Tax Act, 1961 (for short ‘the Act’).

2.

Brief facts of the case are that the assessee filed its return of income for the assessment year under consideration declaring the total income of Rs. 6,86,805/-. The return was processed u/s 143(1) of the Act. During the assessment proceedings, the AO received information from the Sales Tax Department, Maharashtra that certain bogus entities, during the year relevant to the assessment year under consideration, issued bogus bills to a large number of tax payers including the present assessee. As per the information 2 Assessment Year: 2011-12 the assessee obtained bogus bills from Growell Enterprises, Turbo Sales Exim Pvt. Ltd. and Hariom Traders amounting to Rs. 16,15,950/-. Accordingly, the AO issued notice u/s 148 of the Act. In response thereof the assessee submitted that the return already filed may be treated as return filed in response to notice u/s 148 of the Act. The AO further issued notice u/s 143 (2) and 142 (1) along with the questionnaire. The assessee was further asked to submit the information of J-I and J-II, statement, stock register, mode of payment, transportation bills and octroi challan and delivery challan pertaining to the purchases claimed. The authorized representative submitted some of the details, however, failed to produce transportation bills, delivery challan and octroi challan. Notices u/s 133 (6) issued to the parties concerned received back un-served. Independent investigation carried out by the Inspector Income Tax also established that the purchase in question were not genuine. One more opportunity was given to the assessee to produce the parties and to furnish the requisite details. Since, the assessee failed to do the same the AO held the purchases in question as bogus and added the entire amount of bogus purchases to the income of the assessee.

3.

In the first appeal the Ld. CIT(A) after hearing the assessee confirmed the addition made by the AO and dismissed the appeal of the appellant/assessee. Aggrieved by the order of Ld. CIT (Appeals), the assessee has challenged the impugned order by filing the present appeal.

4.

The assessee has challenged the impugned order by raising the following effective ground:-

1. “On the facts and in the circumstances of the case, and also in law, the Ld. CIT (A) erred in confirming the addition of Rs. 16,15,950/- made by the Ld. AO on account of disallowance of the purchases, holding the same to be non-genuine. Your 3 Assessment Year: 2011-12 appellant, therefore, prays that the disallowance be deleted.” 5. Before us, the Ld. counsel for the assessee submitted that since the assessee has submitted the ledger account of the parties, confirmation of amount received copies of invoice along with delivery challan, relevant abstract of bank statement and statement showing comparative analysis of gross profit and net profit ratio, the assessee has discharged the onus of proving the genuineness of the transaction. The Ld. counsel further submitted that there cannot be a sale without any purchase and since the AO has not rejected the sale, the purchases cannot be bogus.

6.

On the other hand, the Ld. Departmental Representative (DR) submitted that since, the assessee has failed to submit the details of vehicle expense, vehicle number, type of vehicle and transport receipt for verification, the assessee has failed to discharge the onus of proving genuineness of the purchases. Moreover, the independent verification made by the Inspector has established that the purchases in question are not genuine. Hence, the Ld. CIT

(A) has rightly confirmed the addition made by the AO and there is no merit in the contention of the assessee.

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