ITO 22(3)(4), NAVI MUMBAI vs. SANDEEP LAXMAN SHIRKE, NAVI MUMBAI

The captioned appeal by the revenue for Assessment Year [AY] 2010-11 and cross appeal by assessee assails the order of Ld. Commissioner of Income Tax (Appeals)-33 [CIT(A)], Mumbai dated 03/09/2013. The sole issue involved here is certain addition on account of bogus purchases which we take up in succeeding paragraphs.

Briefly stated, the assessee, being resident individual engaged in the business of garments exports under proprietorship concern Konkan Industries, was assessed u/s 143(3) vide Assessing Officer [AO] order dated 05/03/2013 where the total income of the assesse was assessed at Rs.1,22,03,181/- as against returned income of Rs. 4,22,829/- filed by the assesse on 11/01/2011 after sole addition of certain bogus purchases for Rs.1,17,80,352/-. The assessee reflected turnover of Rs.1.20 crores against which declared net profit was Rs.5,19,284/-. During assessment proceedings, the assesse was found to have made purchases from two parties namely Shivraj Traders & Vinayak Enterprises during the impugned AY which were listed as suspicious dealer on the website of Maharashtra Sales Tax Department. Summons & C.O. 23/Mum/2015 Sandeep Laxman Shirke Assessment Year-2010-11 issued u/s 131 for the production of suppliers and notices issued u/s 133(6) to confirm sales transactions yielded no result, which led the AO to treat these purchases as bogus purchases and therefore, the same were disallowed. Resultantly, all purchases claimed by the assessee got disallowed. 3. Aggrieved the assessee assailed the same before Ld. CIT(A) with partial success vide impugned order dated 03/09/2013 where the assessee, in support of purchases, submitted various documents like purchases invoices, quantitative details, delivery challans, bank payments details, invoice cum packing list, shipping bill for export and bill of lading etc. along with confirmatory letters from the suppliers. After perusing the same, Ld. CIT(A) was, to a certain extent, convinced with the claim of the assessee and restricted the said disallowance to Rs.2,98,818/-. Aggrieved, the revenue is in appeal before us. 4. The Ld. Departmental Representative drew our attention to the fact that the assesse failed to substantiate the purchases by production of suppliers despite being making purchases from these two parties only and mere production of purchases documents was not sufficient to prove the claim conclusively and therefore, Ld. CIT(A) erred in providing the quantum relief to the assessee. 5. Per contra, Ld. Counsel for assessee [AR] drew our attention to the fact that the assessee suffered full disallowance of purchases during the year whereas no sales could ever be achieved without making any purchases. Nevertheless, the assessee was in possession of relevant purchase and sales documents which were produced before Ld. CIT(A) & C.O. 23/Mum/2015 Sandeep Laxman Shirke Assessment Year-2010-11 who after appreciating the same was convinced with the claim of the assessee and rightly restricted the said disallowance and therefore, no interference was called for in the matter. 6. We have heard the rival contention and perused the relevant material on record. Upon perusal of para 4 & 5 of impugned order of Ld. CIT(A), we note that the assessee has produced various documents in support of purchase / sale viz. purchase invoices, delivery challans, Bank payment details, sale invoice cum packing list, shipping bill for export, Bill of lading and confirmation letter from the suppliers. The assessee was also successful in reconciling the quantitative details. We also note that the assessee has made total purchases of Rs.117.80 Lacs during the year against sale of Rs.120.79 Lacs and total purchases have been disallowed by the revenue, which is not justified at all. Therefore, under the circumstances, at the most, the assessee could suffer disallowance to account for profit element only embedded in these transactions, which Ld. CIT(A) has rightly done. The Ld. CIT(A) after considering the factual matrix and Gross Profit earned by the assessee, restricted the said disallowance to Rs.2,98,818/- which is fair and reasonable on the facts and circumstances. We note that Ld. CIT(A) has erred in appreciating the GP rate earned by the assessee during the impugned AY. However, we do not find it necessary to interfere with the conclusion of Ld. CIT(A) and therefore, confirm the disallowance of Rs.2,98,818/- notwithstanding the GP rate earned by the assessee. & C.O. 23/Mum/2015 Sandeep Laxman Shirke Assessment Year-2010-11 7. The assessee, in its cross appeal, has assailed the action of Ld. AO in making full disallowance of purchases. As we have confirmed the order of Ld. CIT(A), the same results into dismissal of both the appeals. 8. In nutshell, both the appeals stands dismissed. Order pronounced in the open court on 24th May, 2017.