DHARMESH VINAYKUMAR SHAH,MUMBAI vs. ITO WARD-41(2)(1), MUMBAI

In this appeal, the assessee has raised the following grounds:–

The brief facts of the case are that the assessee is an individual and is a proprietor of M/s Jatin International engaged in the business of trading in computer parts. For the year under consideration, the assessee filed his return of income on 30/09/2009, declaring a total income of Rs. 4,51,240. During the assessment proceedings, the assessee was asked to file the details of purchases, TIN, and names and addresses of parties from whom purchases were made. In response thereto, the assessee filed the details along with the documentary evidence. During the assessment proceedings, information was received from the Sales Tax Department, Mumbai regarding suspicious parties who are only providing accommodation entries without doing any actual business. On going through the details submitted by the assessee, it was found that the parties with whom the assessee had made purchases are amongst the list of bogus parties. It was observed that the total purchases of Rs. 96,79,247, by the assessee are from the following parties who are engaged in providing accommodation entries:-

During the assessment proceedings, notices under section 133(6) of the Act were also issued to the said parties, however, no such concern was found at the given address. Accordingly, the Assessing Officer (“AO”) vide assessment order passed under section 143(3) of the Act treated the entire purchase of Rs. 96,79,247, from the said parties to be bogus/non-genuine and added the same to the total income of the assessee under section 69C of the Act as unexplained expenditure. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee. Being aggrieved, the assessee is in appeal before us.

We have considered the submissions of both sides and perused the material available on record. We find that the coordinate bench of the Tribunal in assessee’s own case in Dharmesh Vinaykumar Shah v/s ITO, in ITA No. 4881/Mum./2015, for the assessment year 2010-11, vide order dated 21/04/2017, restricted the addition in respect of non-genuine purchases to 2.5% under similar facts and circumstances, by observing as under:-

We further find that even the AO vide assessment order dated 22/03/2016, passed under section 143(3) read with section 147 of the Act for the assessment year 2011-12, has restricted the disallowance to 2.24% of the non-genuine purchases. Insofar as the decision of the Hon’ble jurisdictional High Court in Shoreline Hotel (P.) Ltd. v/s CIT [2018] 98 taxmann.com 234, relied upon by the learned CIT(A), we find the same to be factually distinguishable, as the taxpayer, in the said case, was engaged in running a hotel and there was no corresponding sales against the non-genuine purchases. However, in the present case, corresponding sales made by the assessee out of the disputed purchases have not been doubted by the Revenue. Thus, in the absence of purchases, the assessee could not have affected corresponding sales. Therefore, respectfully following the judicial precedent in the assessee’s own case cited supra, we direct the AO to restrict the addition to 2.5% of the bogus purchases. Accordingly, grounds raised in the assessee’s appeal are partly allowed.

In the result, the appeal by the assessee is partly allowed. Order pronounced in the open Court on 27/07/2023