DCIT 25(1), MUMBAI vs. SHRADDHA DEVELOPERS, MUMBAI

The captioned appeal by revenue for Assessment Year [AY] 2010- 11 assails the order of Ld. Commissioner of Income tax (Appeals)-35 [CIT(A)], Mumbai dated 10/05/2013 qua deletion of addition of Rs.96,26,712/- made by Ld. Assessing Officer [AO] u/s 69C on account of bogus purchases.

Facts leading to the dispute are that the assessee, being resident firm, was assessed u/s 143(3) at Rs.3,62,78,100/- for impugned AY vide Assessing Officer [AO] order dated 08/02/2013 after addition u/s 69C qua bogus purchases for Rs.96,26,712/- as against returned income of Rs.2,66,51,387/- e-filed by the assessee on 14/10/2010. The assessee was engaged as builders & developers. During assessment proceedings, the assessee was found to have made bogus purchases from 9 parties which were listed as suspicious dealers by Sales Tax Department, Maharashtra. To confirm the same, notices u/s 133(6) issued to these parties but the same remained un-served and spot inquiries made by the inspector revealed non-existence of parties at the given addresses. The assessee contended that the consumption of material was available on records, purchases were backed by respective invoices and the payments were through banking channels and therefore, there was no basis to treat the purchases as bogus. However, not convinced, AO rejected the claim of the assessee and treated the impugned purchases Shraddha Developers Assessment Year-2010-11 as unexplained expenditure u/s 69C and added the same to the income of the assessee. 3. The assessee contested the same with success before Ld. CIT(A) vide impugned order dated 10/05/2013 and raised similar contentions and submitted various documents to justify the purchases made by him. Ld. CIT(A) noted that the payments were though banking channels, sales turnover was not disputed by AO and the additions has been made merely on the basis of information obtained from Sales Tax Department. Further, the assessee submitted respective purchase invoices, ledger extracts, bank statement, quantitative statement of items purchased, statement of per square feet consumption of each item, after perusal of which, the Ld. CIT(A) was convinced with the various contentions of the assessee and therefore, deleted the impugned additions. Aggrieved, the revenue is in appeal before us and contested the relief provided by Ld. CIT(A). 4. The Ld. Departmental representative drew our attention to the fact that none of the alleged bogus supplier appeared before AO in response to notice u/s 133(6). Further, the physical verification by inspector at their respective addresses revealed that none of the party existed at the given addresses which, in itself, cast serious doubt on the claim of the assessee. The assessee, despite having been made such heavy purchases from these suppliers could not produce even a single supplier to substantiate his claim. Further, the assessee failed to conclusively prove the actual physical delivery and consumption of material at various project sites of the assessee and therefore, Ld. CIT(A) erred in providing relief to the assessee particularly when the onus to prove the purchases Shraddha Developers Assessment Year-2010-11 beyond doubt squarely lied on the assessee and the assessee has failed to discharge the same. Therefore, the assessee deserves full disallowance against bogus purchases. 5. Per contra, the Ld. Counsel for assessee [AR] placed reliance on the findings of Ld. CIT(A) to contend that the assessee made exhaustive submissions in this regard before Ld. CIT(A), who after considering the same, provided relief to the assessee and therefore, the same was perfect in order and require no interference. 6. We have heard the rival contentions and perused the relevant material on record. After analyzing the various contentions of respective representatives coupled with observation / findings of Ld. CIT(A) and after appreciating factual matrix of the case, we find that the assessee do not deserve full relief against the impugned purchases particularly when none of the supplier could substantiate the claim of the assessee before AO. No doubt, the assessee was in possession of invoices, payments were though banking channels, quantitative / consumption details were available on record and sales turnover were not doubted by the revenue, but nevertheless, the assessee failed to substantiate his claim conclusively. The Tribunal, invariably, in all such cases, have taken a stand that even if presuming that all purchases were bogus, entire addition thereof was not warranted for particularly when the sales were not in dispute and the addition, if any, which has to be made in all such cases is to account for profit element embedded in such purchase transactions. Therefore, after due discussion with respective representatives, we restrict the said disallowance to 8% of alleged bogus purchases of Rs.96,26,712/- which comes to Rs.7,70,137/-. Shraddha Developers Assessment Year-2010-11 7. In nutshell, the revenue’s stands partly allowed in terms of our above order.