ITO Vs Shri Sunil Govind Agre (ITAT Mumbai)
During the course of assessment proceedings, the AO called for information u/s 133(6) from the above two parties in order to verify the genuineness of transactions. However, the notices sent by him could not be served and these were returned un-served by the postal authorities with the remark “not known”. The AO noted that the TIN Nos. of the above two parties mentioned in the website of the Sales Tax Department are matching with the TIN reflected in the purchase bills filed by the assessee. The AO sent a show cause notice along with the statement recorded by the Sales Tax Authorities to the assessee vide letter dated 10.02.2014 asking to explain why the above purchases amounting to Rs.85,08,600/- shall not be treated as unexplained expenditure u/s 69C of the Act. The said show cause notice and the reply to it has been extracted by the AO in the assessment order dated 10.03.2014.
The AO was not convinced with the reply of the assessee for the reason that in spite of request, the assessee failed to produce either of the two parties before him for examination except stating that the purchases and sales are genuine. Relying on the statements and findings of the Sales Tax Department, Government of Maharashtra coupled with the fact that the notices issued by him u/s 133(6) to the said two parties were returned un-served by the postal authorities, the AO made an addition of Rs.85,08,600/- u/s 69C of the Act.
In the instant case the notices issued by the AO u/s 133(6) were returned un-served by the postal authorities with the remarks “not known”. The assessee failed to produce the parties before the AO for examination.
However, we find that though the assessee was not able to produce the above parties before the AO for examination, it is a fact on record that the AO has not doubted the sales. Thus it is logical that without corresponding purchases, the assessee could not have made the sales. Such being the facts, the case of the present assessee is distinguishable from the case laws relied on by the Ld. DR.
Considering the entirety of facts and circumstances of the case, we find that the Ld. CIT(A) has rightly restricted the disallowance to the peak of purchases of Rs.31,50,000/- taken as an alternate ground by the assessee. Thus we confirm the order of the Ld. CIT(A).
FULL TEXT OF THE ITAT JUDGEMENT
This is an appeal filed by the Revenue. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner of Income Tax-45, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’). Though the case was fixed for hearing before the Tribunal on 10.08.2018 and 31.07.2018, neither the assessee nor his authorized representative appeared on the above date. As there is non-compliance by the assessee, we are proceeding to dispose off this appeal after hearing the Ld. DR and examining the relevant materials available on record.
2. The grounds of appeal filed by the revenue read as under:
1. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in partly deleting the addition of Rs.85,08,600/- after accepting that the parties from whom purchase were made were bogus and were rotating funds.
2. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in directing the Assessing Officer to take the peak of the purchase without giving any logic or justification.
3. The appellant prays that the order of the Ld. CIT(A) on the above ground be set aside and the addition made in the Assessment order may kindly be restored as the Hon’ble Supreme Court in the case of N.K. Proteins Ltd. Vs DCIT has upheld the Hon’ble Gujarat High Court order which held that ‘addition on the basis of undisclosed income could not be restricted to certain percentage when the entire transaction was found as bogus’.
3. Briefly stated, the facts are that the assessee filed his return of income for the assessment year (AY) 2011-12 on 30.09.2011 declaring total income of Rs.5,07,610/-. The assessee is engaged in trading in computer system, assembled systems and peripherals etc. in the name and style of his proprietary concern M/s Infocom Technologies/S.N. Enterprises. During the course of assessment proceedings, the AO observed that as per the information received from the Sales Tax Department, Government of Maharashtra the assessee has obtained bogus purchase bills from the following two parties :
