GEMINI ENGI FAB LTD,MUMBAI vs. DCIT 9(3)(2), MUMBAI

The captioned appeal by assessee for Assessment Year [AY] 2009-10 assails the order of the Ld. Commissioner of Income-Tax (Appeals)-16 [CIT(A)], Mumbai dated 29/08/2016 qua confirmation of certain additions against bogus purchases. 2.1 Facts leading to the same are that the assessee being resident corporate assessee engaged in the business of manufacturing & trading of Engineering Machines was subjected to an assessment u/s 143(3) read with Section 147 for impugned AY on 11/03/2015 at Rs.3,16,56,220/- after addition of certain bogus purchases for Rs.2,05,32,621/-. The original return was filed on 30/09/2009 at Rs.50,60,120/- which was processed u/s 143(1). The solitary issue involved in the appeal is addition against bogus purchases. 2.2 The reassessment proceedings were initiated upon 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.2,05,32,621/- from four parties. Consequently, notice u/s 148 dated 26/03/2014 was issued to the assessee which was followed by statutory notices u/s 143(2) and 142(1).

Aggrieved, the assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated 29/08/2016 and reiterated the contention that the purchases were genuine. The Ld.CIT(A), relying on several judicial pronouncements, concluded that the onus was on assessee to prove the purchase transactions and the assessee failed to discharge the same since the assessee could not prove actual delivery of material. Finally, after elaborate discussion and examining various case law on the issue, Ld. CIT(A) restricted the impugned additions to 12.5% of alleged bogus purchases to account for suppressed profit embedded in the impugned purchases. Aggrieved, the assessee is in further appeal before us.

The Ld. Counsel for Assessee [AR], submitted that the assessee was in possession of primary purchase documents and the payments were through banking channels and therefore, the addition of 12.5% was not warranted for and even otherwise the same was on the higher side.

Per Contra, Ld. DR placing reliance on the findings of Ld. CIT(A) drew our attention to the fact that the revenue has accepted the stand of Ld. CIT(A) and is not in further appeal before this Tribunal. Our attention is Gemini Engi-Fab Limited Assessment Year 2009-10 further drawn to the fact that the assessee was dealing in heavy items like machinery but failed to provide any transportation details or evidences to prove actual delivery of material and mere possession of purchase invoices or payment through banking channels, by itself, was not conclusive to establish the claim of the assessee. Further, the assessee made purchases from local parties but could not produce any of the party for confirmation of the transaction.

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 material intensive and could not be carried out without consumption of material. 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 evidence to prove actual delivery of material or furnish any details of transportation as required by Ld. AO, 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 and Gemini Engi-Fab Limited Assessment Year 2009-10 reasonable, we find no reason to interfere with the same and therefore, no hesitation in dismissing assessee’s appeal. 7. Resultantly, the assessee’s appeal stands dismissed. Order pronounced in the open court on 04th October, 2017.