VENUS CHEMICALS (INDIA),MUMBAI vs. ITO 24(3)(4), MUMBAI

We heard the parties and perused the record. The assessee is a dealer in synthetic rubber and rubber chemicals. Consequent to the information received from Sales tax department that certain parties (called hawala parties) are indulging in providing only accommodation bills without actually supplying the materials, the revenue examined those details. It was noticed that the assessee herein have purchased goods during the years under consideration from a party

The AO directed the assessee to produce evidences for transportation of materials and payment of octroi, but the assessee did not furnish them. The AO, then deputed his inspector, to verify the supplier. The Inspector reported that M/s Krish Rubber Traders also does not have evidence for transportation of materials and payment of octroi. He also noticed that the supplier does not have a godown. The above said supplier had admitted before the Sales tax authorities that it had issued only accommodation bills without actually supplying the materials. The AO gave a copy of the said statement to the assessee. Thereafter, the AO issued summons to the supplier and recorded a statement from Shri Anuj L Assawa, who again reiterated the submissions made before the Sales tax authorities. Before the AO, the assessee could not furnish delivery challans and stock records also. Hence the AO held that the assessee has not made purchases from the above said party and accordingly disallowed entire amount of purchases referred above in the respective years.

In the appellate proceedings, the Ld CIT(A) directed the assesee to reconcile the purchases and sales by filing stock details. The assessee furnished the same and the said details were also forwarded to AO for examination. In the remand report, the AO submitted that there was no mismatch. Hence the Ld CIT(A) took the view that the assessee might have purchased goods from some other channel and not from M/s Krish Rubber Traders. Accordingly, by placing reliance on hosts of case law, the Ld CIT(A) took the view that the disallowance of entire amount of purchases was not justified and only the profit

We heard rival contentions and perused the record. We notice that the assessing officer has disallowed entire amount of purchases by placing reliance on the statement given by the supplier both before the sales tax authorities and before him. The AO has also stated that the assessee has not furnished stock details. However, before Ld CIT(A), the assessee could reconcile the purchases and sales and the AO also did not find any mismatch in the remand proceedings. Hence the ld CIT(A) has taken the view that the assessee might have purchased goods from different channels and obtained accommodation bills from the above said supplier in order to account those purchases. Since the sales has been accepted, in our view, the Ld CIT(A)’s inference cannot be found fault with, particularly in view of the fact that the supplier has denied supplying materials before the AO also.

Since the purchases have been correlated with the sales, we are of the view that the Ld CIT(A) was justified in taking the view that the profit element embedded from such purchases alone can be brought to tax. In the instant case, the purchases have been treated as having been made from undisclosed sources. Hence the natural inference is that the assessee might have profited there from in the form of lower prices and saving of taxes. The ld CIT(A) has estimated the profit at 12.50% of the value of impugned purchases. Before us, the assessee could not furnish any other material in order to compel us to disturb the findings given by Ld CIT(A). Accordingly we uphold the orders passed by Ld CIT(A) in all the three years.

In the result, all the three appeals of the assessee are dismissed. Order has been pronounced in the Court on 22.9.2017.