SUNIL PRAVINCHANDRA JOSHI,MUMBAI vs. ITO 25(1)(2), MUMBAI

Sunil Pravinchandra Joshi Assessment Year: 2009-10 Sl. No. TIN No. Name of the Party Amount(Rs.) 1 27710363744v Atlas Enterprise 5,91,902 2 27280504194v Manav Impex 2,54,592 3 27490507134v Carbon Enterprises 2,53,094 4 27410583032v Tara Enterprises 1,52,942 5 27500537441v Skand Industires 44,491 6 27790554111v Yash Impex 8,64,151 TOTAL 21,61,172 Consequently, statutory notice u/s 148 dated 01/03/2014 was issued to the assessee which was followed by notices u/s 143(2) and 142(1). 2.2 The assessee in support of the transactions, submitted purchase register, sale register and invoice cum challans and submitted that the payments were made by the assessee to the said suppliers through banking channels. However, notices u/s 133(6) issued by Ld. AO to confirm the transactions remained un-served and returned back by the postal authorities with the remark ‘left’. Finally, not convinced, Ld. AO, relying on the decision of Hon’ble Gujarat High Court rendered in Simit P. Sheth [356 ITR 451], made estimated additions @ 12.5% of alleged bogus purchases which came to Rs.2,70,147/-. The same, upon confirmation by first appellate authority, is being contested before us.

The Ld. AR reiterating the submissions contended that the goods purchased by the assessee has subsequently been sold to the sole customer of the assessee and there could be no sale without actual purchase of goods and therefore, the impugned additions were not justified. Our attention is further drawn to Gross Profit Rate reflected by the assessee over past several years. Reliance has been placed on several Sunil Pravinchandra Joshi Assessment Year: 2009-10 judicial pronouncements in support of the contention that the additions could not be made merely due to non-service of notice u/s 133(6). Per Contra, Ld. DR submitted that a fair estimation of the addition has already been made by the lower authorities and therefore, the same was quite reasonable and justified.

We have carefully heard the rival contentions and perused relevant material on record. We are of the considered opinion that there could be no sale without purchase of actual material since the assessee was engaged in trading activity. The sales turnover achieved by the assessee has not been disputed by the revenue and the payments were through banking channels. The assessee was in possession of primary purchase documents. At the same time, the assessee could not produce any party for confirmation of the account and notices sent u/s 133(6) elicited no response. The perusal of Tax Audit Report reveals that the assessee was not maintaining adequate stock records. All these factors cast serious doubt on assessee’s claim. Therefore, in such a situation, the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which lower authorities have rightly done so.

So far as the submissions of Ld. AR are concerned, we find that complete onus to substantiate the impugned purchases with cogent Sunil Pravinchandra Joshi Assessment Year: 2009-10 evidences rested on the assessee. The Ld. AR also stressed the point that there was no attempt to inflate the purchases since the goods were procured at more or less at the same rate as purchased from other parties. We do not agree with the same since it is not the case that rate of goods are in dispute rather here the purchases, itself, are under dispute. Similarly, we find that the case laws being relied upon by Ld. AR has been rendered on factual matrix of the particular case and have no universal application and therefore, could not help assessee in any manner.

Coming to factual matrix of the case, it is evident from purchase summary filed by the assessee that it has not made any purchases from the entity namely Manav Impex and therefore, the additions with respect to this party could not be sustained. Further, the Gross Profit Rate of 12.5% as estimated by lower authorities, in our opinion, is quite reasonable on factual matrix and do not require any interference on our part. Therefore, the impugned additions are worked out @12.5% of Rs.19,06,580/-, being purchases made from the remaining five parties. The same comes to Rs.2,38,322/-. The stand of Ld. First appellate authority stands modified to that extent.