ITO WD 2(2), KALYAN vs. K MANYAR, ULHASNAGAR

This appeal has been filed by the revenue against order dated 07/07/2016 passed by the Ld. Commissioner of Income Tax (Appeals)-3, Thane, pertaining to the Assessment Year 2011-12, whereby the Ld. CIT (A) has partly allowed the appeal filed by the assessee against assessment order passed/s 143(3) read with section 147 of the Income Tax Act, 1961 (for short ‘the Act’).

Brief facts of the case are that the assessee Karta, HUF a trader in ply- wood, filed its return of income for the assessment year under consideration declaring total income of Rs.2,89,090/-. The return was processed u/s 143(1) of the Act.

Subsequently, on the basis of information received from the Sales Tax Department regarding bogus purchases made by various companies including the present assessee from hawala entities which used to issue bogus bills without selling any goods, the assessment was re-opened u/s 147 of the Act. The assessee was one of the companies, which had made bogus purchases from one of the said entities. As per the information, the assessee company during the year relevant to the assessment year under consideration made bogus purchases to the tune of Rs. 72,15,465/- from such entities, Victor Intertrade Private Ltd.

In response to the notice u/s 148 of the Act the authorized representative appeared before the AO and submitted that the original return filed u/s 139(1) of the Act may be treated as return of income in response to the said notice. The assessee objected the re-opening, however, the assessee’s objection was rejected. During the re-assessment proceedings, the assessee could not establish the genuineness of the transaction. Accordingly, show cause notice was issued as to why the amount of bogus purchases should not be added to the income of the assessee. The assessee submitted that the purchases were genuinely made through broker and the goods were directly delivered at the doorstep in own vehicles. The assessee further submitted that the payments were made to the parties through banking channels. To substantiate its claim, the assessee submitted copy of audit report, copies of purchase invoices and details of assets purchased copy of bank statements etc. The assessee however, failed to produce confirmation from the party concerned and evidence to establish consumption of goods, delivery challans stock register to prove the genuineness of the transaction. The assessee also failed to produce the party before AO. Since, the assessee could not satisfy the AO by producing sufficient evidence that the transactions were genuineness, the AO made addition of Rs. 72,15,465/- to the income of the assessee and determined the total income of the assessee at Rs75,04,550/-.