ITO 15(3)(2), MUMBAI vs. VITECH EQUIPMENT P.LTD, NAVI MUMBAI

The present appeal has been preferred by the Revenue against the order dated 16.12.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.

The brief facts of the case are that the assessee is engaged in business of manufacturing & fabrication of process equipments. During the year the Assessing Officer (hereinafter referred to as the AO) found that assessee had made purchases from following parties, who have been declared as suspicious:

The assessee was asked to produce the above parties for verification. There was no compliance of notice under section 133(6). Therefore, the AO has made the addition on account of bogus purchases of Rs.48,75,666/-.

Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has partly allowed the appeal of the assessee by observing as under: “2.4.30 As narrated earlier, the Ld. A.O. in this case has held that the parties from whom the purchases were made by the appellant were found to be bogus and that is the reason for which it was not produced during the assessment proceedings. Not having doubted the consumption/sales, the motive behind obtaining bogus bills thus, appears to be inflation of purchase price so as to suppress true profits. Considering the facts of the case as well as the various case laws cited (supra) especially in the cases of CIT vs. Simit P. Sheth, Bholanath Poly Fab and Sanket Steel Traders (supra), I estimate the suppressed profit to the extent of 12.5% of the purchases made from the bogus entities as the suppressed profit element embedded in 3 M/s. Vitech Equipment Pvt. Ltd. such purchases. This estimation is in addition to the GP shown by the appellant. Accordingly, Ground No. 3 is partly allowed.”

We have heard the rival contentions of both the parties. Ld. D.R. relied upon the decision of the Tribunal, Ahmedabad Bench in the cases of Shwetambar Steels vs. ITO Ahmedabad and Ganesh Rice Mills vs. CIT (294 ITR 316). The facts in the present case show that assessee could not produce the parties from whom goods are stated to have been purchased. The suppliers were found to be engaged in providing bogus bill without actual dealing of goods. In this regard, the assessee has stated that they had submitted quantitative details of stock with respect of the sales with purchases from the parties during the assessment proceedings. The assessee has submitted the detail of corresponding sales in respect of the purchase from the said parties. As mentioned above the AO has never disputed or examined the aspect of sales receipts. Since the sales made by the assessee was not doubted or disputed by the AO and he has accepted the sales receipts of the assessee as it is, therefore, the AO cannot deny that purchases were not made by the assessee and the material was not used for its sales. What is under dispute is the purchases from the parties from whom bills have been taken and cheques have been issued to them. Purchases are not in dispute but the parties from whom purchase are shown to have been made are disputed and suspicious. The AO had made the addition as some of the suppliers were declared hawala dealers by the VAT Department. This may be a good reason for making further investigation but the AO did not make any further investigation and merely completed the assessment