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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI C.N. PRASAD, JM & SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R
Per Manoj Kumar Aggarwal (Accountant Member)
The captioned appeal by assessee for Assessment Year [AY] 2009-10 contest the order of Ld. Commissioner of Income-Tax (Appeals)- 14 [CIT(A)], Mumbai Appeal No.CIT(A)-14/IT-274/14-15 dated 25/07/2016 qua confirmation of certain addition on account of alleged bogus purchases. The assessment for impugned AY was framed Super Stream Boiler Engineers Private Ltd Assessment Year 2009-10 by Ld. Assistant Commissioner of Income Tax-7(2) on 30/09/2014 u/s 143(3) read with Section 147 of the Income Tax Act, 1961. 2.1 Facts leading to the same are that the assessee being resident corporate assessee engaged in the business of manufacturing of boilers & boiler parts was subjected to an assessment u/s 143(3) read with Section 147 for impugned AY on 30/09/2014 at Rs.81,04,530/- after addition of certain alleged bogus purchases for Rs.41,53,188/-. The original return was filed on 30/09/2009 at Rs.39,51,340/- which was accepted in scrutiny assessment u/s 143(3) on 16/11/2011. The solitary issue involved in the appeal is addition against certain alleged bogus purchases. 2.2 The reassessment proceedings were initiated upon receipt of certain information from Sales Tax Department, Maharashtra regarding dealers indulging in bogus purchase bills and it was noted that the assessee stood beneficiary of such bogus purchase bills to the tune of Rs.41,53,188/- from two such entities namely Asian Steel & Hariom Traders. Consequently, notice u/s 148 dated 10/03/2014 was issued to the assessee which was followed by statutory notices u/s 143(2) and 142(1). 2.3 The assessee failed to produce any of the said party for confirmation of transactions and also failed to file relevant evidences to substantiate the genuineness of the transactions which led the Ld. AO to treat the same as bogus purchases and add back the same to the income of the assessee. 3. Aggrieved, the assessee contested the same on legal grounds as well as on merits without any success before Ld. CIT(A) vide impugned Super Stream Boiler Engineers Private Ltd Assessment Year 2009-10 order dated 25/07/2016 where Ld. CIT(A) confirmed the stand of Ld. AO. Aggrieved, the assessee is in further appeal before us.
The Ld. Authorized Counsel for Assessee [AR] primarily contested the proceedings on legal grounds by submitting that the reasons records for reopening were supplied to the assessee only after issuance of notice u/s 143(2) and therefore, the proceedings are to be quashed in terms of judgment of Hon’ble Apex Court rendered in GKN Driveshafts (India) Ltd. Vs. ITO [259 ITR 19]. The Ld. AR, in the alternative, submitted that full disallowance of alleged bogus purchases was not justified since the assessee was in possession of primary purchase documents and the material purchased by the assessee from these suppliers was finally sold by him, which is evident from the quantitative details / stock register. Per Contra, Ld. Departmental Representative justified the reopening by drawing our attention to the facts that the reasons were supplied within a reasonable time during the course of proceedings and therefore, the additions were justified.
We have carefully heard the rival contentions and perused relevant material on record. So far as the legal ground is concerned, it is evident that notice u/s 148 has been issued on 10/03/2014 and the assessee while responding to the same vide its letter dated 28/03/2014 demanded statement of reasons for reopening of assessment. Admittedly the reasons have been supplied to the assessee during the course of the proceedings, a copy of which has been submitted by Ld. AR. The main thrust of the arguments advanced by Ld. AR is that these reasons have been supplied only after the issuance of notice u/s 143(2) and therefore, the same has vitiated the reassessment proceedings. However, we find Super Stream Boiler Engineers Private Ltd Assessment Year 2009-10 no merits in the same since there is no such impediment or requirement for issuance of statutory notice u/s 143(2). In other words, there is no requirement in the law that the reasons must be supplied to the assessee before issuance of statutory notice u/s 143(2) and also there is no provision to hold that reassessment proceedings stood vitiated if the reasons are supplied after issuance of notice u/s 143(2). Therefore, the legal ground raised
by assessee stands dismissed.
6. So far as the quantum additions are concerned, we find that the assessee failed to substantiate the transactions before Ld. AO by producing any of the impugned suppliers. However, a perusal of documents placed on record reveals that the assessee is in possession of primary purchase documents like invoices & few delivery challans etc. The assessee has also placed on record stock register of the items purchased from these suppliers. The turnover achieved by the assessee has been accepted by the revenue and the payments were made by the assessee through banking channels. 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. Keeping in view the overall factual matrix, we estimate the additions @12.5% of alleged bogus purchases of Rs.41,53,188/- which comes to Rs.5,19,149/- and delete the balance additions.
7. Resultantly, the assessee’s appeal stands partly allowed.
Order pronounced in the open court on 21st March, 2018.