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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI C.N. PRASAD, JM & SHRI MANOJ KUMAR AGGARWAL, AM
Per Manoj Kumar Aggarwal (Accountant Member) 1. By way of captioned appeal for Assessment Year [AY] 2010-11, the revenue has contested the relief provided to assessee qua bogus purchases by Ld. Commissioner of Income tax (Appeals)-35 [CIT(A)], Mumbai vide order dated 14/10/2014. 2. Briefly stated, the assessee being resident individual, has been assessed u/s 143(3) for impugned AY at Rs.66,01,390/- after disallowance of certain bogus purchases u/s 69C for Rs.58,53,495/- as against returned income of Rs.7,47,900/- filed by the assessee on 27/09/2010. The assessee was engaged as civil contractor under the proprietorship concern namely S.M.Developers and achieved turnover of Rs.301.35 Lacs. Pursuant to receipt of information from Sales Tax Department, the assessee was found to have made purchases from following bogus / suspicious dealers:- S.No. Name of the party Amount (Rs.) 1. Siddhi Vinayak Steel 1,87,200/- 2. Aayushi Enterprises 8,76,151/- 3 . Ajay Stone 1,63,471/- 4. Arco Enterprises 1,01,017/- 5. Arihant Traders 1,84,691/- 6. Aryen Sales Corporation 1,82,655/- 7. Mahalaxmi Corporation 7,11,047/- 8. Manibhadra Trading Co. 5,64,423/- 9. Nirmal Trading Co. 2,44,527/- 10. Rahul Traders 4,67,469/- 11. Raj Traders 10,91,000/- 12. Shakti Trading Co. 2,28,842/- 13. Vinayak Trading Co. 8,51,002/- Total 58,53,495/- Shaitansingh M. Rathod Assessment Year 2010-11 To confirm the transactions, notices u/s 133(6) were issued to the above parties but the same were returned back un-served in most of the cases with the remarks ‘left’ or ‘not known’. The same were confronted to the assessee but since no satisfactory reply was received from him, AO treated the same as bogus purchase and added the same to the income of the assessee u/s 69C.
Aggrieved, the assessee agitated the same with partial success before Ld. CIT(A) vide impugned order dated 14/10/2014 where the Ld. CIT(A) appreciated the purchase invoices, ledger extracts and Bank statement of the assessee produced in support of purchases and came to conclusion that since sales has been accepted by the revenue, entire addition of bogus purchases was not warranted but addition of Rs.4,68,280/- being 8% of bogus purchases of Rs.58.53 Lacs would meet the end of justice. Aggrieved, the revenue is in appeal before us.
The Ld. Departmental representative [DR] placed reliance on the order of Ld. AO to contend that the assessee failed to substantiate the purchases made by him in any manner and mere production of documents was not sufficient to prove the actual delivery of goods. The assessee failed to produce the parties before Ld. AO and also could not produce confirmatory letters. Notices issued u/s 133(6) remained un-served and complete onus to prove the purchases squarely lied on the assessee, which he has failed to discharge and therefore, rightly been saddled with full disallowance and the Ld. CIT(A) erred in granting relief to the assessee.
Shaitansingh M. Rathod Assessment Year 2010-11 5. Per contra, Ld. AR placing reliance on the decision of Ld. CIT(A) drew our attention to the fact that the assessee was a government contractor where the work done by the assessee was thoroughly inspected by the government agency and without purchase of material, the said work could not have been undertaken by the assessee. Further, the revenue has not doubted the sales turnover of the assessee and the assessee accepting the shortcoming in his purchase documents accepted the estimated addition made by Ld. CIT(A) and did not file any further appeal.
We have heard the contentions and perused the relevant material on record. We are convinced with the arguments of Ld. DR that the assessee has failed to discharge the primary onus of proving the purchases and it could not produce evidences to show actual delivery of material and also could not produce confirmatory letters from the alleged bogus suppliers. However, even if all the purchases are found to be bogus, we find that sales turnover has not been disputed by the revenue and moreover, the assessee is in possession of primary purchase documents and the books of accounts of the assessee are audited. The payments are through banking channels.Therefore, in such a situation, the addition, which could be made, was to account for profit element embedded in these transactions to factorize profit earned by assessee against purchase of material in the grey market and undue benefit of VAT against bogus purchases, which Ld. CIT(A) has rightly done so. Therefore, the order of Ld. CIT(A) being, fair Shaitansingh M. Rathod Assessment Year 2010-11 and reasonable, require no interference on our part and the same is hereby confirmed.
The revenue’s appeal stands dismissed. Order pronounced in the open court on 07th June, 2017.