TARUN PRINTING WORKS P.LTD,MUMBAI vs. ITO 8(3)(1), MUMBAI

The assessee has filed this appeal challenging the order dated 30-09-2016 passed by Ld CIT(A)-14, Mumbai and it relates to the assessment year 2011-12. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the addition of Rs.23,95,088/- relating to alleged bogus purchases.

2 M/s. Tarun Printing Works Pvt. Ltd.

The aggregate amount of purchases was Rs.23,95,088/-. The assessee furnished the copies of bills, delivery challans and payment details to the AO. However, the AO noticed that the assessee did not maintain stock register and could not produce transport challans. Further notices issued by the AO u/s 133(6) were returned unserved. The ward Inspector also could not locate the parties. When these informations were confronted, the assessee stated that the transactions have been closed by making payments by way of cheques and it has furnished latest available address. It was submitted that the goods were supplied at the door steps of the assessee. It was further submitted that the above said two parties have failed to pay VAT taxes and hence they have been listed as hawala dealers. Since they have failed to pay the taxes, the assessee was constrained to pay the VAT tax. It was submitted that the goods, which are in the nature of consumables, have been fully consumed in the printing business.

door steps of the assessee. I find that the above said explanations of the assessee to be reasonable. I notice that the assessee has furnished copies of bills, delivery challans and payment details. I notice that the assessing officer has not commented upon these evidences. Instead, he has given more importance about the fact that the notices issued to the above said parties have been returned back. I notice that the transactions of the assessee has taken place in the year 2010 and the enquiry is being conducted in 2014, i.e., almost after expiry of four years. Hence the assessee has pleaded that it has given the last available address to the AO. I notice that the AO did not take efforts to find out the present addresses of the above said parties from the Sales tax department, who would have been in a position to supply the same. The AO has also failed to show that the assessee could have carried out the job printing works, without consuming the materials covered by the alleged bogus purchases. There is no evidence to show that the payment made to the assessee by way of cheques have flown back to the assessee. The Net profit ratio declared by the assessee worked out to 1.62%, 4.27% and 4.66% respectively in assessment years 2009-10, 2010-11 and 2011-12. Thus, during the year under consideration, the net profit rate has more than doubled. The labour charges received by the assessee during the year under consideration were Rs.3.22 crores and in the immediately preceding year, it was Rs.2.87 crores. The “cost of goods sold” declared by the assessee was around 50% in both the years.

view that the addition may be restricted to 4% of the alleged bogus purchases and the same would put this issue at rest. Accordingly I modify the order passed by Ld CIT(A) on this issue and direct the AO to restrict the addition to 4% of the alleged bogus purchases.