TOPNOTCH CHEMICALS P.LTD,NAVI MUMBAI vs. ITO WD 8(3)(2), MUMBAI

ITA Nos.6554/Mum/2016 to M/s. Topnotech Chemicals Pvt. Ltd., & M/s. Mitool Equipments Pvt. Ltd., 3. Rival contentions have been heard and record perused.

Briefly facts of the case are that in this case the returns of income, declaring income of Rs 2,31,890/- (in A.Y. 2009-10), Rs 4,07,350/- (in A.Y.10-11) & Rs. 5,43,070/-(in A.Y.11-12) were tiled on 22.09.2009, 27/09/2010 & 29/09/2011, respectively. During A Yr 2009-10, a revised return declaring same income i.e. Rs 2,31,890/- was filed on 04.10.2009. Subsequently, information from the sales tax department were received by the AO that the assessee had booked the bogus purchases, therefore, the cases of the assessee were re-opened, after recording necessary reasons/satisfaction and the notices U/S 148 of the Act, were issued and served upon the assessee. In compliance to the notices issued the assessee stated that the revised return filed on 04.10.2009 and original returns filed for A Yr 2010-11 and 2011-12, may be treated as return filed in response to notice. The assessee is manufacturer or cable reeling drums, cable drag chain and collector column. The re-assessment order u/s 143(3) r.w.s. 147 of the Act, were finalized on 03.03.2014 A Yr 2009- 10) and 18.03.2015 (A Yr 2010-11) and 19.03.2015 (A Yr 2011-12) at total income of Rs 7,21,574/-, Rs. 25,77.270/- & 17,21,700/- after making the additions of Rs.4,89,684/- Rs.21,69,923 & Rs.12,85,743/- respectively on account of bogus purchases.

By the impugned order, CIT(A) confirmed the entire addition on account of bogus purchases by disregarding assessee’s plea to uphold only profit element involved in such purchases which was alleged to be avoided.

I have considered rival contentions and carefully gone through the orders of the authorities below. From the record I found that The reassessment proceedings were initiated in Assessee’s case by issuance of the notice under section 148 of the Act. The Assessee in reply to the said notice stated that the original/revised return filed by him may be treated as response to the notice under section 148. The assessment was reopened to verify the purchases made from various parties on the basis of investigation carried by Sales Tax Department. The A.O. has also relied on statements of persons whose cross examination has not been provided to the Assessee. During the course of assessment proceeding for A.Y.2009-10 the A.O. asked the Assessee to substantiate purchase of the goods from the following parties. Sr. No. Name of the Party Amount in Rs. 1 Shantinath Corporation 15,444/ - 2 Navdeep Trading 10,192/- Corporation 3 N.B. Enterprises 32,398/- 4 Payal Enterprises 2,01,540/- 5 Sheetal Trading Co., 2,30,110/-

According to the A. O. as per the information received from the Sales Tax Department, these parties had indulged in issuing bills without to ITA No.6556/Mum/2016 M/s. Topnotech Chemicals Pvt. Ltd., & M/s. Mitool Equipments Pvt. Ltd., delivery of any goods or material. The A.O. inspite of issuing notices under section 133(6) of the Act or deputing the ward inspector to find out the whereabouts of the said parties have specifically asked the Assessee vide order sheet noting dated 05/02/2014 to produce the parties to prove the genuineness of the purchases. Hence no adverse inference can be drawn against the Assessee. However, the A.O. finalized the assessment vide assessment order dated 03.03.2014 under section 143(3) r.w.S 147 of the Act determining total income at Rs.7,21,574/- by disallowing of Rs.4,89,684/ - under section 69C of the Act.

I found that during the course of assessment proceedings on basis of information received from the sales tax department the A.O. alleged that the Assessee has obtained bogus bills from the above parties. The Assessee has purchased iron sheets from the above mentioned parties for the consideration of Rs.4,89,684/-. From the documents placed on record I find that the purchased material has been used in the business of the Assessee in manufacturing cable reeling drums and cable drag chain. The same were subsequently sold to the various parties and income received from the said transaction was offered for tax. The Assessee to substantiate the genuineness of the purchases furnished purchase bills, sales bills, bank statement, party wise purchase and sales details before the A.O. Gross Profit of the impugned assessment year is in consonance of the Gross Profit declared for the earlier and subsequent assessment years.

Facts and circumstances in all the years are parametria, therefore, following reasoning given hereinabove, I direct the AO to restrict the addition to the extent of 10% of such bogus purchases in all the years under consideration.

In the result, appeals of the assessee are allowed in part.