DCIT - 9(1)(1), MUMBAI vs. ACE ENERGY INFRASTRUCTURE PVT. LTD., MUMBAI

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ITA 5181/MUM/2016Status: DisposedITAT Mumbai08 November 2017AY 2009-104 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that while the assessee could not prove the genuineness of purchases from the supplier, the addition should only account for the profit element embedded in such transactions. The CIT(A)'s estimation was considered fair and reasonable.

What were the facts?

The Revenue appealed against a relief granted to the assessee by the CIT(A) regarding additions for bogus purchases. The AO had added the full amount of alleged bogus purchases, but the CIT(A) restricted the addition to 12.5%.

What were the issues?

Whether the entire amount of alleged bogus purchases should be added to the income, or only the profit element embedded therein, when the assessee could not prove the genuineness of the purchases but payments were made through banking channels.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, MUMBAI

Before: SHRI D.T. GARASIA, JM & SHRI MANOJ KUMAR AGGARWAL, AM

Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeal by revenue for Assessment Year [AY] 2009- 10 assails the order of the Ld. Commissioner of Income-Tax (Appeals)- 16 [CIT(A)], Mumbai, Appeal No. CIT(A)-16/IT-292/DCIT9(1)(1)/2015-16 dated 29/05/2016 qua relief provided to assessee against certain bogus purchases. The assessment for impugned AY was framed by Ld. Deputy ITA.No.5181/Mum/2016 Ace Energy Infrastructure Private Limited Assessment Year-2009-10 Commissioner of Income Tax 9(1)(1), Mumbai [AO] u/s 143(3) read with Section 147 of the Income Tax Act, 1961 on 25/03/2015. 2.1 Facts leading to the same are that the assessee being resident corporate assessee engaged as civil contractor was subjected to an assessment u/s 143(3) read with Section 147 for impugned AY on 25/03/2015 at Rs.3,16,77,250/- after addition of certain bogus purchases for Rs.88,79,106/-. The original return was e-filed on 30/09/2009 at Rs. 2,27,98,140/- which was processed u/s 143(1). The solitary issue involved in the appeal is addition against 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.88,79,106/- from an entity namely V.M.Udyog. Consequently, notice u/s 148 dated 28/03/2014 was issued to the assessee which was followed by statutory notices u/s 143(2) and 142(1). 2.3 During assessment proceedings, notice u/s 133(6) was sent to the said supplier to confirm the purchase transactions. However, the same was returned back un-served by postal authorities with remarks left. Upon confrontation, the assessee contended that the purchases were made through agent and payment was through banking channel and the material was consumed in assessee’s business. However, not convinced, Ld. AO concluded that the assessee failed to discharge the onus casted on him to prove the purchases transactions. Finally, treating the same as non-genuine purchases, the same were added to the income of the assessee.

1.

ITA.No.5181/Mum/2016 Ace Energy Infrastructure Private Limited Assessment Year-2009-10 3. Aggrieved, the assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated 29/05/2016 where Ld. CIT(A) after appreciating the factual matrix and placing reliance on several judicial pronouncements restricted the additions to 12.5% of alleged bogus purchases. Aggrieved, the revenue is in further appeal before us.

4.

The Ld. Departmental Representative [DR] relied on the stand of Ld. AO whereas Ld. Counsel for Assessee [AR] asserted that estimation made by Ld. CIT(A) was quite fair and reasonable.

5.

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 /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 supplier and notice 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 purchases, which Ld. CIT(A) has rightly done. Therefore, finding the same to be quite fair & reasonable, we dismiss revenue’s appeal.

6.

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

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