ASST CIT 31 (1), MUMBAI vs. M/S HITECH WRITING INSTRUMENTS, MUMBAI

The dispute in the present appeal is confined to partial relief granted by the learned Commissioner (Appeals) in the matter of addition made because of alleged non-genuine purchases.

Briefly the facts are, the assessee is a partnership firm engaged in the manufacturing of writing pen and related items. For the assessment year under dispute, assessee filed its return of income on 29.07.2009 declaring total income of Rs. 7,39,520/-. Subsequently, based on information received from DGIT (Inv.), Mumbai that the assessee is beneficiary of accommodation entries by way of non-genuine purchases worth Rs. 9,03,570/-, the Assessing Officer (AO) reopened the assessment under section 147 of the Income Tax Act, Assessment Year: 2009-10 1961. In course of assessment proceedings, the AO called upon the assessee to furnish supporting evidence to prove the purchases. As alleged by the AO, the assessee could not furnish items wise day-to-day stock register and some other details called for. Further, he observed, notice issued under section 133(6) of the Act to the concerned selling dealer seeking information, returned back un- served. Based on the above, AO concluded that the purchases of Rs. 9,03,570/- are non-genuine and accordingly disallowed them. The assessee contested the aforesaid disallowance before learned Commissioner (Appeals). Partly accepting assessee’s contention, learned Commissioner (Appeals) restricted the disallowance to 12.5% of alleged non-genuine purchases.

I have considered the rival submissions and perused the material on record. As rightly observed by learned Commissioner (Appeals), though, the AO has treated the purchases as non–genuine, however, he has not doubted the consumption and sales effected by the assessee. Thus, logical conclusion would be, in absence of the purchased goods, the assessee could not have carried on the manufacturing activity and sold the products. Thus, in such factual position, the doubt, if any, is only with regard to the source of purchases. That being the case, only the profit element embedded in such doubtful purchases can be considered for addition. After taking note of the business of the assessee and other factors, I am in agreement with the decision of the learned Commissioner (Appeals) in restricting the disallowance to 12.5% of the alleged non-genuine purchases. Grounds are dismissed.

In the result, appeal is dismissed. Order pronounced in the open court on 25th June, 2021.