DCIT CENT. CIR. 4(2), CENT. RANGE - 4, MUMBAI vs. SARYU PROPERTIES AND HOTELS PVT. LTD., MUMBAI

ITA.No.5272/Mum/2016 Saryu Properties and Hotel Private Limited Assessment Year-2011-12 Deputy Commissioner of Income Tax Central Circle-4(2), Mumbai [AO] u/s 143(3) read with Section 147 of the Income Tax Act,1961 on 15/02/2016. The solitary issue involved under appeal is addition on account of certain alleged bogus purchases. 2.1 Facts leading to the same are that the assessee being resident corporate assessee engaged in Hotel Business & Real Estate Development & Finance was subjected to an assessment u/s 143(3) read with Section 147 for impugned AY on 15/02/2016 at Rs.1,24,37,410/- under normal provisions after addition of certain bogus purchases for Rs.65,29,714/-. The original return was e-filed on 30/09/2011 at Rs.22,14,170/- which was assessed u/s 143(3) on 30/12/2013 at Rs.59,07,700/-. 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.65,29,714/- from twelve such parties. Consequently, notice u/s 148 dated 03/06/2014 was issued to the assessee which was followed by statutory notices u/s 143(2) and 142(1). 2.3 During assessment proceedings, notices u/s 133(6) were sent to the said suppliers to confirm the purchase transactions. However, the same were returned back un-served by postal authorities with remarks like not known, not available, left etc. The physical inspection revealed that none of the parties existed at the given addresses. Upon confrontation, the assessee submitted purchase orders, invoices, transport details, stock register, bank statement evidencing payment to ITA.No.5272/Mum/2016 Saryu Properties and Hotel Private Limited Assessment Year-2011-12 suppliers etc. to support the purchase transactions. 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.

Aggrieved, the assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated 30/06/2016 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.

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.

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 hotel business. 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 any of the impugned supplier and notices sent u/s 133(6) remained un- served and physical inspection revealed that parties did not exist at the given addresses, 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 ITA.No.5272/Mum/2016 Saryu Properties and Hotel Private Limited Assessment Year-2011-12 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.

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