ITO 20 (3)(4), MUMBAI vs. SHRI. SURESH UKCHAND MEHTA, MUMBAI

When the appeal was called for hearing, no one appeared for 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.

Briefly the facts are, the assessee is an individual and is stated to be a trader in metals. For the assessment year under dispute, the assessee filed his return of income on 18.09.2009 declaring total income of Rs. 3,52,083/-. Based on information received from DGIT (Inv.), Mumbai that the assessee is a Assessment Year: 2009-10 beneficiary of accommodation entries by way of bogus purchase bills worth Rs. 26,96,720/-, the Assessing Officer (AO) reopened the assessment under section 147 of the Act. In course of assessment proceeding, the AO called upon the assessee to prove purchases with supporting evidences. However, the evidences furnished by the assessee was not upto the satisfaction of the AO. Therefore, he treated the purchases as non-genuine. However, being of the view that the assessee might have purchased the goods from grey market, the AO disallowed 12.5% out of the alleged non- genuine purchases. In other words, he disallowed an amount of Rs. 3,37,090/-. The assessee contested the aforesaid disallowance before learned Commissioner (Appeals). Partly accepting the contention of the assessee, learned Commissioner (Appeals) restricted the disallowance to 5% of the alleged non-genuine purchases.

I have considered the submissions, learned Departmental Representative and perused the materials on record. The dispute before me is confined only to the profit element which can be considered for disallowance. While the AO has estimated the profit element embedded in the alleged non genuine purchases at 12.5%, learned Commissioner (Appeals) has reduced it to 5% by taking note of the applicable VAT rate of 4% on the goods purchased by the assessee. Having considered the material facts as well as the nature of business of the assessee, I fully agree with the decision of learned Commissioner (Appeals) in restricting the disallowance to 5%. Grounds raised are dismissed.

In the result, appeal is dismissed.