ASST CIT 15(1)(2), MUMBAI vs. BHARAT WIRES ROPES LTD, MUMBAI

The captioned appeal by revenue for Assessment Year [AY] 2011- 12 assails the order of the Ld. Commissioner of Income-Tax (Appeals)- ITA.No.96/Mum/2016 Bharat Wires Ropes Limited Assessment Year-2011-12 24 [CIT(A)], Mumbai, Appeal No. CIT(A)-22/DCIT(OSD)10(3)/IT 332/13- 14 dated 15/10/2015 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 (OSD)-10(3) [AO], Mumbai u/s 143(3) of the Income Tax Act, 1961 on 27/02/2014. 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 corporate assessee engaged in the business of manufacturing of wire & wire ropes was assessed for impugned AY u/s 143(3) on 27/02/2014 at Rs.5,55,04,010/- as against returned income of Rs.2,13,86,708/- filed by the assessee on 22/09/2011. The assessee has suffered sole addition of Rs.2,66,19,848/- on account of certain bogus purchases and same is the sole subject matter of this appeal. 2.2 Pursuant to 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.2,66,19,848/- from two such parties. The assessee contended that the purchases were made from regular suppliers and the same were duly supported by invoices and payments were through banking channels. However, not convinced, Ld. AO treated the same as bogus purchases and added the same to the income of the assessee.

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 and further possession of invoices and payment through banking channels was not sufficient to prove the purchase transactions.

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 material intensive 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 the impugned suppliers which cast serious doubt on assessee’s claim. Therefore, in such a situation, the addition, which ITA.No.96/Mum/2016 Bharat Wires Ropes Limited Assessment Year-2011-12 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.

Resultantly, the revenue’s appeal stands dismissed. Order pronounced in the open court on 25th October,2017.