DCIT 28(2), NAVI MUMBAI vs. OM DEVELOPERS, NAVI MUMBAI

The captioned appeal by revenue for Assessment Year [AY] 2010- 11 assails the order of the Ld. Commissioner of Income-Tax (Appeals)- 26 [CIT(A)], Mumbai, Appeal No. CIT(A)-26/IT/771/13/-14/66 dated 16/10/2015 qua relief provided to the assessee against certain alleged bogus purchases made by the assessee. The assessment for impugned AY was framed by Ld. Deputy Commissioner of Income Tax-28(2) [AO], Mumbai u/s 143(3) of the Income Tax Act, 1961 on 20/03/2013. None has appeared for assessee despite notice and therefore left with no option, we proceed to decide the appeal on the basis of documents available on record and after hearing Ld. Departmental Representative [DR]. 2.1 Facts leading to the same are that the assessee being resident firm engaged in the business of civil construction, builders & developers was assessed u/s 143(3) for impugned AY on 20/03/2013 at Rs.1,48,22,370/- as against returned income of Rs.26,10,200/- e-filed by the assessee on 28/09/2010. The assessee has suffered addition of Rs.1,19,09,038/- on account of certain bogus purchases and same is the sole subject matter of this appeal. 2.2 During assessment proceedings, notice u/s 133(6) was sent to few suppliers to confirm the purchase transactions. However, notice u/s 133(6) sent to two suppliers from whom purchases were made for Rs.1,19,09,038/- remained un-served. These parties were identified / ITA.No.5849/Mum/2015 Om Developers Assessment Year-2010-2011 listed as hawala parties by Sales Tax Department, Maharashtra. Upon confrontation, the assessee could not produce any party for confirmation which led the Ld. AO to disbelieve the said transactions and resultantly, the same were added to the income of the assessee.

Aggrieved, the assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated 16/10/2015 where Ld. CIT(A) after appreciating the factual matrix restricted the additions to Gross Profit Margin of 23.42% being reflected by the assessee for impugned AY. Aggrieved, the assessee is in further appeal before us.

The Ld. Departmental Representative [DR] contended that the assessee miserably failed to prove the purchase transactions by producing the suppliers and therefore, Ld. CIT(A) erred in granting substantial relief to the assessee.

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 civil construction. The sales turnover achieved by the assessee has not been disputed by the revenue and the payments were through banking channels. The purchases were backed by invoices. At the same time, the assessee could not produce any confirmation from the impugned suppliers and all notices sent u/s 133(6) remained un- served, which 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 element earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus ITA.No.5849/Mum/2015 Om Developers Assessment Year-2010-2011 purchases, which Ld. CIT(A) has rightly done. Therefore, finding the same to be quite fair & reasonable, we dismiss revenue’s appeal.

Resultantly, the revenue’s appeal stands dismissed. Order pronounced in the open court on 08th November, 2017.