ITO 22(2)(3), MUMBAI vs. SMT. LAVINA S GWALANI, MUMBAI

Briefly the facts are, the assessee is an individual and stated to be an exporter of jewellery. For the assessment years under dispute, the assessee had filed returns of income in regular course. Assessments in case of the assessee were originally completed under section 143(3) of the Income Tax Act, 1961. Subsequently, the Assessing Officer (AO) received information from the Assessment Years: 2007-08 & 2008-09 DGIT (Inv.), Mumbai that the assessee is a beneficiary of accommodation entries provided by way of bogus purchases from one of the concerns related to Bhanwarlal Jain Group, a leading entry provider. Based on such information, the AO reopened the assessments for both the assessment years. In course of assessment proceedings, the AO called upon the assessee to produce supporting evidence to prove the purchases. In response, the assesseee furnished purchase bills, ledger account copy, bank statement copy etc. to prove the purchases. The assessee also furnished the sales bills containing stamp of custom authorities in support of export of goods. The AO, however, raised doubt with regard to the source of purchase. He was of the view that the assessee must have purchase the goods from grey market or unverified sources and to regularise such transaction has obtained accommodation bills from the concerned parties. Therefore, after rejecting the books of account the AO proceeded to disallow 25%, being the profit element on the alleged non- genuine purchases in both the assessment years under dispute. The assessee contested the aforesaid disallowances before learned Commissioner (Appeals). Partly accepting the submissions of the assessee, learned Commissioner (Appeals) restricted the disallowance to 12.5% of the alleged non-genuine purchases in both the years.

When the appeals were called for hearing, none appeared on behalf of the assessee. However, considering the nature of dispute, I proceed to dispose of the appeal ex-parte qua the assessee after hearing the learned Departmental Representative and based on materials on record.

I have considered the submission of learned Departmental Representative and perused the material on record. As could be seen, the AO has accepted the fact that the assessee is an exporter of jewellery and in fact had purchased the goods which are subject matter of dispute. He has only doubted the source of such purchases. For this reason alone, instead of disallowing the entire purchases, the AO has restricted the disallowance to 25%, being the profit element embedded in such purchases. Learned Commissioner (Appeals) has reduced such disallowance to 12.5%. Considering Assessment Years: 2007-08 & 2008-09 the nature of business carried on by the assessee and all other relevant factors, I am of the considered opinion that disallowance made at 12.5% on the alleged non-genuine purchases is fair and reasonable, hence, deserves to be upheld. Accordingly, I do so. Grounds are dismissed.

In the result, appeals are dismissed. Order pronounced in the open court on 9th July, 2021. (SAKTIJIT DEY) JUDICIAL MEMBER म ुंबई Mumbai; दिन ुंक Dated: 09/07/2021 Alindra, PS आदेश प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.