DY. CIT CIRCLE-1, THANE vs. M/S MYTHIC FURNITURES P. LTD., THANE

This appeal in A.Y.2009-10 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-1, Thane in appeal No.11368/2014-15 dated 24/07/2020 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 30/09/2014 by the ld. Dy. Commissioner of Income Tax, Circle-1, Thane (hereinafter referred to as ld. AO).

At the outset we find that the appeal filed by the Revenue is delayed by 108 days. In support of the same, the ld. Assessing Officer has filed a condonation petition stating the reason that due to Covid-19 Pandemic, lockdown was announced and that the office of the Income Tax department was not functioning with full strength. The Revenue has placed reliance on the Government of India Notification No.218979 dated 31/03/2020 in Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance 2020 (No.2 of 2020) dated 31/3/2020 as per Clause 3(1)(b) extending the time limit specified in Income Tax Act which falls during the period from 20th day of March 2020 to 29th June 2020 for the purpose of filing appeal till 30/06/2020 or such other date as the Central Government by notification specify in this behalf. Subsequently, the Government vide Notification No.35/2020 dated 24/06/2020, has extended the said time limit up to 31/03/2021. In view of the above, the delay of 108 days is hereby condoned and the appeal of the Revenue is admitted for adjudication.

None appeared on behalf of the assessee. We have heard the ld. DR and perused the materials available on record. We find that assessee is engaged in the business of dealing in furniture and fixtures and furniture accessories and had filed its return of income for the A.Y.2009- 10 on 22/09/2009 declaring total income of Rs.42,57,010/-. The ld. AO observed that assessee had made purchases from Donear Trading Pvt. Ltd., for Rs.16,30,688/- whose name appear to be tainted dealers in the M/s. Mythic Furnitures P. Ltd., website of sales tax department of Government of Maharashtra. This information was admittedly passed on to the ld.AO by the Sales Tax department of Government of Maharashtra through the DGIT (Investigation Wing) of Income Tax department, which triggered the reopening of assessment in the case of the assessee. In the re-assessment proceedings, the ld AO noted that the assessee furnished the books of accounts, bank statements, profit and loss account, balance sheet, computation of income, party wise purchases, details of expenses debited to profit and loss account, bills and vouchers, tax audit report with its annexures and other records maintained by the assessee. The ld. AO observed that assessee could not prove the genuinity of the purchases made from the aforesaid supplier as notice issued u/s.133(6) of the Act by the ld. AO was returned unserved. Accordingly, the ld. AO proceeded to disallow the entire value of purchases u/s.69C of the Act in the re-assessment.. The assessee pleaded that all the payments were made to the aforesaid supplier by account payee cheques through regular banking channels. It was also pleaded that without the aforesaid purchases, there cannot be any corresponding sales , which has been accepted by the ld AO. The ld. CIT(A) however, observed that since those parties were classified as tainted dealers and that they had admitted on oath before the sales tax department that they had given accommodation entries without actually supplying the goods and since the assessee had made purchases from those parties, the genuineness of the transactions could not be conclusively proved by the assessee especially even the sales has not been deposited by the said supplier. However, the ld. CIT(A) observed that since the sales made by the assessee are not disputed and that without purchases there cannot be sales, only the profit element thereon, could be brought to tax. This addition was restricted to 12.5% of the value for purchases being the profit embedded in the purchase by the ld. CIT(A).

Aggrieved, the Revenue alone is in appeal before us and assessee is not in appeal before us.

We find that since the sales made by the assessee are not doubted by the Revenue, there cannot be any sales without the purchases. Hence, it could be safely presumed that assessee could have made purchases in the grey market in order to have savings in indirect taxes. Hence, it would be just and fair to bring to tax only the profit element embedded in the value of such purchases, which has been estimated by the ld. CIT(A) @12.5% thereon. We find that this Tribunal in series of decisions has been holding that profit element estimated at 12.5% would meet the ends of justice depending upon the specific industry in which assessees’ were engaged in and respectfully following the same, we hold that the profit estimation made by the ld. CIT(A) @12.5% is in line with those decisions of the Tribunal and does not warrant any interference. Accordingly, the grounds raised by the Revenue are dismissed.

In the result, appeal of the Revenue is dismissed. Order pronounced on 25/ 11/2021 by way of proper mentioning in the notice board.