ITO WD 2(4), KALYAN vs. SANTOKSINGH M GULWAN, ULHASNAGAR

The captioned appeal by revenue for Assessment Year [AY] 2009-10 assails the order of the Ld. Commissioner of Income-Tax (Appeals)-3 Santoksingh M Gulwan Assessment Year 2009-10 [CIT(A)], Thane, Appeal No. 192-THN/15-16 dated 22/08/2016 qua relief provided to the assessee against certain bogus purchases. The assessment was framed by Ld. Income Tax Officer, Ward 2(1), Kalyan u/s 143(3) read with Section 147 of the Income Tax Act on 05/03/2015. None has appeared for assessee despite notice. Left with no option, we dispose- off the same on the basis of material available on record and after hearing Ld. Departmental Representative [DR]. 2.1 Facts leading to the same are that the assessee being resident individual engaged in the business of trading of plywood under proprietorship concern namely Satguru Traders was subjected to an assessment u/s 143(3) read with Section 147 for impugned AY on 05/03/2015 at Rs.1,96,98,960/- after addition of certain bogus purchases for Rs.1,92,73,078/-. The original return was filed on 30/09/2009 at Rs.4,25,880/- 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.1,92,73,078/- from eight such parties. Consequently, notice u/s 148 dated 29/04/2013 was issued to the assessee which was followed by statutory notices u/s 143(2) and 142(1). The assessee reflected turnover of Rs.215.23 Lacs with GP / NP rates of 2.37% & 2.21% respectively.

Aggrieved, the assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated 24/08/2016 where the assessee inter-alia submitted invoice copies, bank statements, ledger extracts, bill wise details of purchases and corresponding sales bills, comparative turnover / profitability chart for three years & Tax Audit Report etc. to substantiate the purchases transactions. After appreciating the same, Ld. CIT(A) restricted the impugned additions to 15% of these alleged bogus purchases which worked out to Rs.28,90,962/-. Aggrieved, the revenue is in further appeal before us.

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.

We have heard the contentions and perused relevant material on record. We are of the considered opinion that there could be no sale Santoksingh M Gulwan Assessment Year 2009-10 without purchase of material keeping in view the assessee’s nature of business which was trading in plywood. 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 the 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.