ITO WD 2(5), KALYAN vs. VIJAYSINGH C. RAJPUROHIT, THANE

Vijaysingh C.Rajpurohit Assessment Year 2011-12 [CIT(A)], Thane, Appeal No. 246-THN/14-15 dated 03/09/2015 qua relief provided to the assessee against certain bogus purchases. The assessment was framed by Ld. Joint Commissioner of Income Tax Officer, Range-2, Kalyan [AO] u/s 143(3) on 24/03/2014. 2.1 Facts leading to the same are that the assessee being resident individual engaged in the business of manufacturing of chemicals under proprietorship concern namely Pacific Chemicals was assessed u/s 143(3) for impugned AY on 24/03/2014 at Rs.64,01,100/- inter-alia, after addition of certain bogus purchases u/s 69C for Rs.51,15,600/- as against returned income of Rs.12,20,269/- e-filed by the assessee on 30/09/2011. The assessee reflected turnover of Rs.11.62 crores with GP/NP rates of 6.97% & 0.96% respectively. 2.2 Pursuant to receipt of certain information from Sales Tax Department, Maharashtra regarding dealers indulging in bogus purchase bills, it was noted that the assessee stood beneficiary of such bogus purchase bills to the tune of Rs.51,15,600/- from three such parties. Notices sent u/s 133(6) to these parties to confirm the transactions either remained un-served or no response was received against the same. The assessee, in support, submitted documentary evidences like invoice copies, transport receipts, weight slips etc. and contended that the material was purchases and consumed in the production process. However, the Ld. AO noted that the assessee could not file any confirmation from the said party and documentary evidences were insufficient to prove the said transactions Vijaysingh C.Rajpurohit Assessment Year 2011-12 conclusively. Finally, not convinced with assessee’s submissions, the purchases were treated as non-genuine and added to the income of the assessee u/s 69C.

Aggrieved, the assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated 03/09/2015 where the assessee reiterating the contentions placed reliance on several judicial pronouncements. The Ld. CIT(A), while concurring with the same to a certain extent, restricted the impugned additions to 25% of these purchases which came to Rs.12,78,900/-. Aggrieved, the revenue is in further appeal before us. 4.1 The Ld. DR placing reliance on the stand of Ld. AO drew our attention to the fact that the assessee failed to substantiate the delivery of material and rightly been saddled with full disallowance. The Ld. DR further submitted that notice sent u/s 133(6) was returned back un-served and the assessee could not produce any of the said party to confirm the transaction and therefore, failed to discharge the onus casted on him. It was further pleaded that purchase invoices and bank statements, by itself, was not sufficient to prove the transactions. 4.2 Per Contra, Ld. Counsel for Assessee [AR] drew our attention to the fact that the assessee consumed the purchased material in the production process and was in possession of primary purchase documents and all the payments were through banking channels and therefore, full addition was not justified. Our attention was drawn to the fact that the assessee Vijaysingh C.Rajpurohit Assessment Year 2011-12 accepted the verdict of Ld. CIT(A) since the same was fair & reasonable under the circumstances.

We have 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 keeping in view the assessee’s nature of business which was manufacturing of chemicals. 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 and other documentary evidences. At the same time, the assessee could not produce any party for confirmation and notices sent u/s 133(6) remained un-served, 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 factorize for profit element earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against bogus purchases, which Ld. CIT(A) has rightly done. Therefore, finding the same to be quite fair & reasonable, we find no reason to interfere with the same.

Resultantly, the revenue’s appeal stands dismissed. Order pronounced in the open court on 04th October, 2017.