ITO 25(1)(3), MUMBAI vs. ASHOK H. SANCHETI, MUMBAI

This is an appeal filed by the revenue against the order of CIT(A)- 35 dated 30.06.2014 for the assessment year 2010-11 in the matter of order passed u/s.143(3) of the IT Act wherein Revenue is aggrieved for deletion of addition of Rs.2,61,77,677/- u/s. 69C of the IT Act.

Rival contentions have been heard and record perused.

Facts in brief are that assessee is a dealer in ferrous and non ferrous metals. During the course of scrutiny assessment, AO observed that the Sales Tax Department has published a list of the parties by whom bogus purchase bills have been issued with the names of various beneficiaries in the public domain. During the course of assessment proceedings 2 Shri Ashok H. Sancheti information was called by AO from these purchase parties and in all the cases the notices issued u/s.133(6) were returned unserved by the postal authorities. AO further observed that on scrutiny of the details, it was noticed that these purchase parties are bogus purchase parties declared by the Sales Tax Department on their website as hawala bogus / suspicious parties. Therefore, the assessee vide office letter dated 8.2.2013 was asked to show cause as to why these purchases should not be treated as unexplained expenditure u/s.69C and assessee was asked to produce the above parties to substantiate his claim alongwith documentary evidences such as transport receipts, challans etc., However these parties were not produced before the AO. Accordingly, AO made addition of Rs.2,61,77,677/- u/s.69C as unexplained expenditure.

By the impugned order CIT(A) deleted the addition after observing as under:- I have' gone through the facts. of the case. The main contention of the' AO for disallowing the said purchases is on the basis of list 'published by the Sales Tax Department and on the basis' that the notices u/s.133(6) were returned unserved and thirdly, on the ground that the assessee was not able to produce the purchasers for verification even though he was given the opportunity to do so. The appellant on the other hand. Has submitted all the details of the purchase bills, the source of payment through bank account and the factum of the sales being made on the' basis of said purchases which has not been disputed by the AO. .The appellant has 'submitted therefore,' that these purchases cannot be doubted and treated as bogus. Keeping in mind the facts of the present case. where the appellant has duly discharged his onus of showing the' evidence of actual' purchases and the sales being made on the basis of the said purchases and the source of payment not being in doubt and' neither there being any evidence noticed by the AO that any of the payments made by the 3 Shri Ashok H. Sancheti cheques have been routed back to the appellant, the ratio in. the decision of Nikunj Eximp Enterprises Pvt. Ltd of the jurisdictional Hon'ble High Court is found to directly apply to the facts of the present case. In the light of the said decision the appeal is allowed.

Against the above order of CIT(A), revenue is in further appeal before us. It was argued by learned DR that the learned CIT(A) grossly erred in not appreciating the fact that the notices under 133(6) issued to the parties from whom alleged bills were received were returned undelivered by the postal authorities and the assessee has also failed to produce the parties before the A.O. He further contended that the learned CIT(A) erred in not appreciating that the assessee has not produced any cogent evidence to substantiate the fact that he had taken actual delivery of goods purchased from these parties.

On the other hand, learned AR placed on record GP chart of the assessee to indicate that gross profit shown by assessee during the year was more or less at par as shown in the earlier orders, accordingly, he contended that addition if any should be upheld to the difference in GP @0.95% on the alleged bogus purchases of Rs.2,61,77,677/-. 7. We have considered rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by lower authorities in their respective orders and found that AO has made addition in respect of bogus purchases and found that notices issued to all these bogus suppliers u/s.133 (6) were returned undelivered by postal authorities and assessee also failed to