ASST CIT 17(2), MUMBAI vs. JITEN HIMATLAL DADIA, MUMBAI

When the case was called for hearing, none appeared on behalf of the respondent assessee. Therefore, we proceed to dispose off the appeal ex–parte qua the respondent assessee after hearing the 2 Shri Jiten Himatlal Dadia learned Departmental Representative and on the basis of material on record.

The issue raised in the present appeal relates to partial relief granted by learned CIT(A) in respect of addition made on account of non–genuine purchases.

Brief facts are, the assessee is a proprietor of M/s. Venus International, which is engaged in the business of import and trading in chemicals, solvents and pharma intermediates. The assessee filed his return of income on 22nd September 2012, declaring total income at ` 1,60,30,012, which was processed on 23rd September 2013, under section 143(1) of the Income Tax Act, 1961 (for short "the Act"). Subsequently, on the basis of information received from the DGIT (Inv.), Sales Tax Department, Mumbai, Government of Maharashtra, indicating that the assessee was engaged in the practice of inflating the purchases by accepting accommodation entries provided by hawala operators through bogus purchase bills. The Assessing Officer re– opened the assessment under section 147 of the Act. During the assessment proceedings, the Assessing Officer called upon the assessee to prove the genuineness of purchases worth ` 25,38,256, claimed to have been made during the year from various parties. Since the Assessing Officer was not satisfied with the evidences furnished by 3 Shri Jiten Himatlal Dadia the assessee to establish the genuineness of purchases. Thus, the Assessing Officer made addition @ 25% of the entire amount of ` 25,38,256, and added it to the income of the assessee.

The learned CIT(A) restricted the disallowance made by the Assessing Officer to 12.5% of the alleged non–genuine purchases.

Before us, the learned Departmental Representative strongly relied upon the observations of the Assessing Officer and submitted that the assessee having failed to prove the genuineness of purchases, the entire amount proposed by the AO representing such purchases has to be added.

Having considered the submissions of the learned Departmental Representative, we find that, though, the assessee may not have been able to prove the genuineness of purchases from the declared sources, however, it is a fact on record that the Assessing Officer has not disputed the sales declared by the assessee. Therefore, it goes to prove that the assessee must have purchased goods from some other undisclosed/unverified source. In such circumstances, it is the settled legal position that the entire purchases cannot be disallowed, but only the profit element embedded in such purchases can be considered for addition. Therefore, keeping in view the decisions of the Tribunal in identical nature of cases, the decision of the learned CIT(A) to restrict

In the result, Revenue’s appeal stands dismissed. Order pronounced in the open Court on 25/10/2021.