PANKAJ P. MEHTA,MUMBAI vs. CIT (A)-36, NFAC, DELHI

O R D E R PER S. RIFAUR RAHMAN (AM)

(A.Y: 2009-10) Pankaj P. Mehta 2. Briefly facts of the case are, assessee an individual engaged in the business of manufacturing of Babycare textile products and filed return of income on 27.09.2009 declaring income of ₹.2,71,230/- for the A.Y.2009-10, and the return was processed u/s. 143(1) of Income-tax Act, 1961 (in short “Act”). Subsequently, Assessing Officer received information from the DGIT(Inv.,), Mumbai about the accommodation entries provided by various dealers and assessee was also one of the beneficiary from those dealers. The assessment was reopened u/s. 147 of the Act based on the information received from DGIT (Inv.,), Mumbai, that the assessee has availed accommodation entries from M/s. Manshi Traders who is said to be providing accommodation entries without there being transportation of any goods. In the reassessment proceedings, the assessee was asked to prove the genuineness of the purchases made from M/s. Manshi Traders. The notices issued to the assessee were returned unserved. Assessing Officer passed the Assessment Order u/s. 144 r.w.s. 147 of the Act as the proceedings are getting time barred by limitation.

(A.Y: 2009-10) Pankaj P. Mehta that assessee had obtained only accommodation entries without there being any transportation of materials and the assessee might have made purchases in the gray market. It is the finding of the Assessing Officer that assessee failed to produce the parties and as such the parties remained unverifiable. Therefore, Assessing Officer treated ₹.5,29,162/- as non-genuine and added to the total income of the assessee.

4. Aggrieved with the above order, assessee preferred appeal before the Ld.CIT(A) and filed detailed submissions. After considering the submissions of the assessee Ld.CIT(A) sustained the addition made by the Assessing Officer.

5. Aggrieved with the above order, assessee is in appeal before us raising following grounds in its appeal: - “1. The Ld. Commissioner of Income Tax (Appeals) erred in making additions of Rs.5,29,160/- on account of purchases made by the assessee treating is as bogus purchases in view of the IT Act.

3. The Ld. Commissioner of Income Tax (Appeals) erred in initiating of penalty proceeding under Section 274 r.w.s 271(1)(c) of the Income Tax Act 1961.

(A.Y: 2009-10) Pankaj P. Mehta 6. At the time of hearing, Ld. Counsel for the assessee reiterated the submissions made before the Ld.CIT(A). Ld. AR submitted that payments were made through banking channels and the sales were accepted by the department. He submitted that once that sales were accepted the purchases cannot be treated as non-genuine and prayed to set-aside the order of the Ld.CIT(A). Further, he submitted that assessee is not pressing the Ground Nos. 2 to 5 of grounds of appeal.

(A.Y: 2009-10) Pankaj P. Mehta entire purchases cannot be added as held by the Bombay High Court in the case of CIT v. Nikunj Eximp [216 Taxman.com 171]. In our considered view there should be an estimation of profit element from these purchases and should be estimated reasonably as the assessee could not conclusively prove that the purchases made are from the parties as claimed, especially in the absence of any confirmations from them. Taking the totality of facts and circumstances, keeping in view the nature of business of the assessee i.e. readymade garments, it would be justified if the profit element embedded in those purchases are estimated at 5%. Accordingly, we direct the Assessing Officer to estimate the profit element from the non-genuine purchases at 5% for the Assessment Year under consideration and restrict the disallowance of purchases to 5% and compute the income accordingly. Accordingly, Ground No. 1 raised by the assessee is partly allowed and other grounds are dismissed as not pressed.

Order pronounced in the open court on 20th September, 2023.