KRISHMA CONCHEM PRODUCTS P.LTD,MUMBAI vs. DCIT 6(2), MUMBAI

The grounds of appeal no.1(i) to (iv) are inter-related and grounds No.1 is against the confirmation of addition of Rs.9,36,000/- by the ld CIT(A) as made by the AO on account of bogus purchases from M/s Sumukh Corporation. The issue raised in ground No.3 is against the confirmation of application of GP rate

Facts of the case in brief are that during the course of assessment proceedings, on random checking of the books of accounts, it was observed that the assessee had purchased goods from M/s Sumukh Corporation which were not appearing in the details of parties/suppliers from whom the purchases were made by the assessee. Accordingly, the AO called upon the assessee to prove the genuineness of the transactions, produce bills/challans of transporters, which were not produced. Moreover, these purchases were made on credit basis. Accordingly, a show cause notice was issued as to why these purchases should not be treated as accommodation entries and brought to tax u/s 68 of the Act. The AO rejected the books of account u/s 145(3) of the Act and also applied GP rate at the rate of 2% on Rs.9,36,000/- and worked out the disallowance to Rs.18,720/-. Aggrieved assessee filed appeal before the ld.CIT(A), who after considering the submissions of the assessee sustained both the additions by observing and holding as under : “3.2 Findings and decision On careful consideration of facts stated in the impugned order vis-a-vis submission of the Ld. A.R., it immensely transpires that the grievance of the assessee lacks merits: As stated by the A.O., the assessee could not furnish necessary evidences in support of claim made by it. As per the bills produced by the assessee, purchases were in relation to a chemical i.e. to say 300 kg chloro-4 Niro Benzo Phenone on 3 different dates of first week of March 2010. No thorough evidence were furnished during the course of 3 the assessment proceedings. Even during the course of appellate proceedings also, the Id. A.R was asked whether he would provide latest confirmation of the party or produce it before the A.O. The Ld. A.R. fairly informed that it was riot possible to produce latest confirmation or to produce the concerned party before the A.O The indifference of not producing the party which issued the bill is indicative of truth. The AO was not doubting all the purchase but doubting only selected purchases for which he had doubt or information as the case may be. The evidence in respect of identity of person responsible for issuing purchase bills was within the knowledge of the assessee or with its employees as subsequently the payments must have been made. The A.G. had specifically mentioned that the said purchases were credit purchases. The bill indicate terms and conditions as 45 days and the bill also states that interest will be charged @ 24% p.a., if the bill is not paid on presentation. There is no evidence that payment was made within 45 days and if it was made subsequent thereof, any interest was paid as per this stipulation laid down in the bill. If the payment is made subsequently to say after a reasonable period, it implies that assessee had fiduciary relationship because no prudent person would like to sell to an unknown person on credit for a long period. In given circumstances, the assessee should produce such person or produce latest confirmation from such seller. The assessee had failed on all counts. The bills itself reveals certain suspicious features. As per tax invoice issued by the seller, column as to 'buyer's order no.' states 'ON TELE', whereas assessee relies on its purchase order which states as '256 - W' and date as 26.2.2010. The seller's invoice reveals no date of purchase order. The seller's address is of Borivali whereas assessee's destination is at village Nare, Tal. Wada which requires transportation and that too for chemical. There are no evidence of transportation. In given facts and circumstances, the claim for impugned purchases did not inspire any credence and I find no reason to interfere with the order of the A.O. making an addition of Rs. 9,36,0001- as bogus purchases. Accordingly, impugned addition of Rs.9,36,000/- is confirmed”. ……. 5.1 During the course of appellate proceedings, the Ld. A.R. had submitted written submission which contained arguments on above mentioned two disallowances adjudicated here above. However, there W1S no explanation objection against this disallowance either in written submission or oral submissions. Even otherwise having regard to the overall facts of the case, I find no reason to interfere with the order of the AO of the issue in dispute and in result impugned addition made by the AO stands confirmed.