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Income Tax Appellate Tribunal, MUMBAI BENCH “J” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2009-10. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-14, Mumbai and arises out of the order u/s 143(3) r.w.s. 147 of the Income Tax Act 1961, (the ‘Act’). 2. The ground of appeal filed by the assessee read as under: -
1. The learned Commissioner of Appeals erred in upholding AO’s order for disallowing bogus purchases aggregating to Rs.6,82,308 on account of M/s Srikem Laboratories Pvt. Ltd. suppliers admitting before Sales Tax Authorities having issued false bills to the Appellant Company.
2. The learned Commissioner of Appeals erred in stating no mention of stock register or end use of material and producing transport bills, in fact all relevant documents including extract of stock register were produced before AO in course assessment proceedings.
3. The learned Commissioner of Appeals erred in dismissing the Appellant appeal without appreciating the fact that AO has not made any investigation about the alleged bogus purchases but disallowed purchases merely on suspicion.
4. Without prejudice to above On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Assessing Officer in reopening the case u/s 148 of the IT Act on the basis of the statement of third party, without considering the facts and circumstances of the case.
3. Briefly stated, the facts of the case are that the assessee filed its return of income for the AY 2009-10 on 28.09.2009 declaring total income of Rs.2,35,55,290/-. The return was processed u/s 143(1). Then the Assessing Officer (AO) received information from the Director General of Income Tax (Inv.) Mumbai that the assessee had obtained bogus purchase bills from the following parties who had been declared as hawala dealers by the Sales Tax Department, Government of Maharashtra: Sr. No. Name of the Pur. Parties Amt. (in Rs.)
1. Subhiksha Enterprises 2,27,489 2. Purab Enterprises 60,975 3. Chemi-Age Enterprises 94,116 4. Bhakti Enterprise 2,99,728 Total 6,82,308 M/s Srikem Laboratories Pvt. Ltd.
In view of the above, the AO issued notice u/s 148 to reopen the assessment made u/s 143(1) of the Act. During the course of reassessment proceedings, the AO requested the assessee to produce the above parties for verification. However, the assessee failed to produce the said parties. The AO noted that the assessee also failed to file the relevant evidence to substantiate the genuineness of transactions. Therefore, the AO made an addition of Rs.6,82,308/- treating the same as bogus purchases.
Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that the Ld. CIT(A) agreed with the reasons given by the AO and confirmed the disallowance of Rs.6,82,308/-.
Before us, the Ld. counsel of the assessee files a Paper Book (P/B) containing the details of alleged bogus purchases and the related purchase invoices. He also files a copy of the order in (i) Assistant Commissioner of Income Tax vs. Mahesh K. Shah (2017) 49 CCH 0028 Mum Trib, (ii) Geolife Organics vs. Assistant Commissioner of Income Tax (2017) 50 CCH 0100 Mum Trib, (iii) Jayesh A. Shah vs. ITO Ward 4(2) Mumbai SMC Bench (iv) ACIT vs. Tarla R. Shah Mumbai E Bench ITA No. 5295/M/2013.
On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A) confirming the disallowance of Rs.6,82,308/- made by the AO.
We have heard the rival submissions and perused the relevant materials on record. We begin with the 4th ground of appeal. We find M/s Srikem Laboratories Pvt. Ltd.
that the AO has reopened the assessment made earlier u/s 143(1). In the case of ACIT vs. Rajesh Jhaveri Stock Brokers P. Ltd. 291 ITR 500 (SC), the Hon’ble Supreme Court has held that intimation u/s 143(1) (a) is not an assessment. Therefore, the notice u/s 148 issued by the AO was held to be valid. The issue being similar, we hold the notice u/s 148 issued by the AO in the instant case as valid and dismiss the 4th ground of appeal filed by the assessee. 7.1 Then we come to the 1st, 2nd and 3rd ground of appeal. We find that during the course of assessment proceedings the AO had asked the assessee to produce the said parties for verification. The assessee failed to produce the above parties before the AO for verification. As the issue involved the genuineness of purchases, verification of the parties by the AO was a basic requirement. In view of the above, the case of the assessee is distinguishable from the case laws relied on by the Ld. counsel of the assessee. In the case of CIT vs. Simit P. Sheth (2013) 38 taxmann.com (Guj), the Hon’ble Gujarat High Court has held that where purchases were not bogus but were made from parties other than those mentioned in the books of account, not entire purchase price but only profit element embedded in such purchases can be added to income of the assessee. That being the position, not the entire purchase price but only the profit element embedded in such purchases can be added to the income of the assessee. The Hon’ble High Court referred to a similar view taken in the case of CIT vs. Vijay M. Mistry Construction Ltd. [2013] 355 ITR 498 (Guj) and CIT vs. Bholanath Poly Fab (P) Ltd. [2013] 355 ITR 290 (Guj).