SHUBH M L SHAH & SONS STEEL P.LTD,RAIGAD vs. DCIT 10(3), MUMBAI

The captioned appeals by assessee for Assessment Years [AY] 2009-10 & 2011-12 assails the common order of Ld. Commissioner of Income tax (Appeals)-24 [CIT(A)], Mumbai dated 29/05/2015 qua confirmation of certain additions with respect to bogus purchases. Since, common issue is involved in both the appeals and the same spring out of common order of Ld. CIT(A), we proceed to decide the same by way of this common order the for sake of convenience & brevity. First, we take up for AY 2009-10.

Facts leading to the dispute are that the assessee, being resident corporate assessee, was subjected to an assessment u/s 143(3) read with Section 147 for impugned AY vide Assessing Officer [AO] order dated 26/11/2013 wherein the total income was assessed at Rs.1,56,64,400/- after addition of certain bogus purchases of Rs.39,18,195/-. The original return of income was filed on 28/09/2009 at Rs.1,06,63,715/- which was assessed u/s 143(3) on 30/12/2011 at Rs.1,17,46,200/-. The assessee was engaged in the business of trading of construction material. The reassessment proceedings were triggered on the basis of information received from the investigation wing of the Income Tax Department that the assessee has obtained bogus purchase bills amounting to Rs.39,18,195/- from various parties who were listed as Hawala bill providers. In support of his claim, the assessee filed copies of invoices and ledger extracts of the alleged bogus suppliers. However, &4457/M/2015 Shubh M.L. Shah & Sons Steel Private Limited Assessment Years-2009-10 & 2011-12 not convinced, AO treated the purchases as bogus purchases on the premises that the assessee failed to establish the physical delivery of goods which led to the impugned additions. 3. The assessee contested the same before Ld. CIT(A) without any success vide impugned order dated 29/05/2015 and raised similar contentions and placed reliance on various judicial pronouncements. However, Ld. CIT(A) noted various discrepancies in the documents produced by the assessee, reached a conclusion that the purchases remained unsubstantiated by the assessee and therefore, confirmed the addition. Aggrieved, the assessee is in appeal before us. 4. The Ld. Counsel for assessee [AR] drew our attention to the fact that the assessee was a trader and reconciled the quantitative details and therefore, as sales turnover has not been doubted by the revenue, the purchase thereof could not be treated as bogus. Further, the accounts of the assessee were duly audited u/s 44AB and the assessee was in possession of purchase invoices and all payments were through banking channels and therefore, the deletion deserves to the deleted. The Ld. AR, placing on record copy of quantitative reconciliation, further contended that the assessee purchased Cement from the alleged bogus suppliers and sold the same during impugned AY itself and reflected sales revenue qua the same and therefore, addition was unjustified. 5. Per contra, the Ld. Departmental representative placed reliance on the order of Ld. CIT(A) by contending that the onus to prove the purchases beyond doubt squarely lied on the assessee which he has failed to discharge and hence, the assessee deserves full disallowance against bogus purchases. &4457/M/2015 Shubh M.L. Shah & Sons Steel Private Limited Assessment Years-2009-10 & 2011-12 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 facts of the case do not justify full disallowance against the impugned purchases particularly when the assessee was in possession of invoices, payments were though banking channels, quantitative details were available on record and sales turnover were not doubted by the revenue. 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, we restrict the said disallowance to 12.5% of alleged bogus purchases of Rs.39,18,195/- which comes to Rs.4,89,774/-. The assessee’s appeal stands partly allowed. 7. Now, we take up AY 2011-12. The assessee has suffered similar disallowance of Rs.27,05,774/- on account of bogus purchases in an assessment u/s 143(3) vide AO order dated 08/01/2014 which was confirmed by Ld. CIT(A) vide impugned order. There being no change in facts or circumstances, taking the same stand, we restrict the impugned disallowance to 12.5% which comes to Rs.3,38,222/-. Resultantly, the assessee’s appeal stands partly allowed. 8. The AO is directed to restrict the additions in terms of our above finding and re-compute Book Profits u/s 115JB and set-off/carry forward of business losses etc., if any. &4457/M/2015 Shubh M.L. Shah & Sons Steel Private Limited Assessment Years-2009-10 & 2011-12 9. In nutshell, both the appeals filed by assessee stand partly allowed.