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Income Tax Appellate Tribunal, “K” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, JM & SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R
Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeal by assessee for Assessment Year [AY] 2010-11 assails the order of the Ld. Commissioner of Income-Tax (Appeals)-21 [CIT(A)], Thane, Appeal No.579/15-16 dated 16/08/2016. The assessment for impugned AY was framed by Ld. Assistant Commissioner of Income Tax, Circle-3, Thane [AO] u/s 143(3) read with ITA.No.6230/Mum/2016 Precise Electricals Assessment Year-2010-11 Section 147 of the Income Tax Act, 1961 on 24/02/2015. None is present for assessee despite notice and no adjournment application is on record. Therefore, we proceed to dispose-off the same on the basis of material available on record and after hearing Ld. Departmental Representative [DR]. The solitary issue involved in the appeal is addition against certain alleged bogus purchases. 2.1 Facts leading to the same are that the assessee being resident firm engaged in manufacturing of transformers was subjected to an assessment u/s 143(3) read with Section 147 for impugned AY on 24/02/2015 at Rs.1,74,23,030/- after addition of certain bogus purchases for Rs.61,62,993/-. The original return was filed on 27/09/2010 at Rs.1,12,60,034/- which was processed u/s 143(1). 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.61,62,993/- from six such parties. Consequently, statutory notice u/s 148 dated 27/08/2013 was issued to the assessee which was followed by notices u/s 143(2) and 142(1). The assessee reflected Gross Profit of Rs.3.89 crores against turnover of Rs.28.65 Crores. 2.3 During assessment proceedings, the assessee, inter-alia, pleaded that it purchased raw material from the supplier and the same was consumed in the manufacturing process and therefore the purchases were genuine. However, not convinced, Ld. AO noted that the assessee failed to provide transportation details, quantitative details etc. and the suppliers, before Sales Tax Authorities, admitted to be indulging in the ITA.No.6230/Mum/2016 Precise Electricals Assessment Year-2010-11 activity of bogus billing without carrying out any actual sale or purchases. Finally, Ld. AO concluded that the assessee failed to discharge the onus casted on him to prove the purchase transactions and therefore, disallowed the same as mere bogus purchases.
Aggrieved, the assessee contested the same without any success before Ld. CIT(A) vide impugned order dated 16/08/2016 where Ld. CIT(A) after appreciating the factual matrix and placing reliance on several judicial pronouncements confirmed the stand of Ld. AO. Aggrieved, the assessee in is further appeal before us.
The Ld. Departmental Representative [DR] relied on the stand of lower authorities and pointed out that the assessee miserably failed to prove the said transactions and therefore, the additions were quite fair and justified.
We have carefully heard the contentions and perused relevant material on record. We are of the considered opinion that there could be no sale without purchase /consumption of material since the assessee was engaged in manufacturing 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 purchases documents. At the same time, the assessee could not substantiate delivery of material in any manner and could not provide satisfactory details of consumption of raw material before lower authorities. Further, the assessee failed to produce any of the six suppliers to confirm the transactions and these suppliers, before Sales Tax Authorities, admitted to be indulging in the activity of bogus billing without carrying out any actual sale or purchase. All these factors cast a ITA.No.6230/Mum/2016 Precise Electricals Assessment Year-2010-11 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. Keeping in view the overall factual matrix and Gross Profit Rate of several years, we estimate the additions @12.5% of alleged bogus purchases of Rs.61,62,993/- which comes to Rs.7,70,374/- and delete the balance additions of Rs.53,92,619/-.
Resultantly, the assessee’s appeal stands partly allowed. Order pronounced in the open court on 07th February, 2018.