DCIT CIR 4, THANE vs. URVASHI INDUSTRIES, THANE

M/s Urvashi Industries 2 & 748/Mum/2016 ORDER PER N.K. PRADHAN, A.M. The captioned cross appeals- one by the Revenue and the one by the assessee – are directed against the order of the Commissioner of Income Tax (Appeals)-3, Thane and arise out of the assessment completed u/s 143(3) r.w.s 147 of the Income Tax Act 1961 (the ‘Act’). As common issues are involved, we are proceeding to dispose them off by this consolidated order for the sake of convenience.

filed by the Revenue read as under:

1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A)-3, Thane erred in deleting the addition of Rs.71,37,242/- out of the total addition of Rs.83,96,755/- made on account of bogus purchases, despite holding that the purchases were not genuine and the assessee failed to prove genuineness of the transactions.

2. On the facts and in the circumstances of the case and in law, Ld. CIT(A)-3, Thane erred in deleting the above addition despite the fact that the assessee failed to discharge his onus of proving the purchases.

3. The appellant prays that the order of the Ld. CIT(A)-3, Thane, may be set- aside and that of the Assessing Officer be restored.

M/s Urvashi Industries 3 & 748/Mum/2016 4. The grounds of appeal filed by the assessee read as under:

1. The Ld. CIT (A) has completed the assessment without considering the facts and circumstances of the case, which is contrary to law and is against the principles of natural justice. 2. a. The Ld. CIT (A) has erred in facts and in law by disallowing a sum of Rs.12,59,513/-, being 15% of the alleged bogus purchases (of Rs.83,96,755/), as inflated purchases made from unverifiable parties, which is without any basis as such. b. The Ld. CIT (A) has erred in ignoring various documentary evidences submitted in support of the genuine purchases made by the appellant firm. c. The Ld. CIT (A) ought to have considered that the Ld. AO has neither afforded any opportunity of cross examination nor has made any efforts to conduct independent enquiries.

5. Briefly stated, the facts of the case are that the assessee filed its return of income for the AY 2010-11 on 23.09.2010 declaring total income at Rs.38,71,980/-. Thereafter, the Assessing Officer (AO) received information from the Sales Tax Department, Government of Maharashtra that the assessee had obtained bogus purchase bills from Dhanera Metal Corporation without actually purchasing goods/materials from them. The details are as under: S. Name of the entry provider Maharashtra F.Y. Amount in the No. VAT No. bills taken by the assessee

1. Dhanera Metal Corporation 27199257913V 2009-10 Rs.83,96,755/- On the basis of such information the AO reopened the assessment by issuing notice u/s 148. During the course of reassessment M/s Urvashi Industries 4 & 748/Mum/2016 proceedings, the assessee filed before the AO ledger account, bank account of the above party. The assessee did not file confirmation of the above party nor the delivery challans, site gate pass/site stock register showing the receipt of goods from the above party in the assessee’s factory. In order to verify the genuineness of transactions, the AO issued notice u/s 133(6) to the above party. The said notice was returned unserved by the postal authority. Then the AO asked the assessee vide order sheet entry dated 17.11.2014 to produce the above party for examination. However, the assessee failed to produce the above party before the AO for examination. The AO has noted that “however, except for filling of ledger of M/s Dhanera Metal Corporation and claiming that as the payment was made through account payee cheque and has been received and utilized for manufacture of finished products sold to third parties, the assessee has not filed any other supporting evidences in the form of confirmation of the party, octroi receipts, stock register etc.” On the basis of above facts, the AO made an addition of Rs.83,96,755/- u/s 69C of the Act.

6. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that the Ld. CIT(A) has restricted the disallowance to 15% of the alleged bogus purchases of Rs.83,96,755/- which works out to Rs.12,59,513/-.

7. Before us, the Ld. DR submits that the assessee failed to produce the said party before the AO for examination. Also the assessee failed to M/s Urvashi Industries 5 & 748/Mum/2016 file confirmation of the above party, octroi receipts, stock register before the AO. Therefore, it is submitted by him that the Ld. CIT(A) should have confirmed the disallowance of Rs.83,96,755/- in full instead of restricting it to 15% of it which comes to Rs.12,59,513/-.

8. On the other hand, the Ld. counsel of the assessee submits that the assessee had submitted documentary evidences before the AO which prove the genuineness of such purchases. Therefore, there was no basis on the part of the Ld. CIT(A) in restricting the disallowance to 15% of the alleged bogus purchases. The Ld. counsel further submits that the AO has neither afforded any opportunity of cross-examination to the assessee nor has made any effort to conduct independent enquiry.