ACIT 26 (1), MUMBAI vs. SHRI. HARISH K ALIMCHANDANI, MUMBAI

This is an appeal by the revenue against the order dated 20.09.2019 of learned Commissioner of Income Tax (Appeals)–40, Mumbai for the assessment year 2010-11.

The sole grievance of the revenue is with regard to restriction of disallowance on account of alleged non genuine purchases to 12.5% of such purchases. 3. Briefly the facts are, the assessee is an individual and is stated to be a manufacturer of EOT cranes and other material handing equipments. For the assessment year under dispute, the assessee filed his return of income on 27.09.2010 declaring income of Rs. 3,42,82,460/-. In the course of assessment proceedings, the Assessing Officer (AO) noticed that as per the information received from Sales Tax Department through DGIT (Inv.), Mumbai, during the Assessment Year: 2010-11 year under consideration, the assessee had received accommodation entries of Rs. 14,64,377/- by way of non genuine purchases from two parties. Based on such information, the AO called upon the assessee to prove the genuineness of such purchases. In response to the query raised by the Assessing Officer, the assessee furnished some documentary evidences to prove the purchases. However, the AO was not convinced. He observed that the concerned selling dealers did not respond to notices issued under section 133(6) of the Act, which made the source of purchases un–verifiable. Accordingly, treating the purchases as non genuine the AO added back amount of Rs. 14,64,377/-. The assessee contested the aforesaid addition before learned Commissioner (Appeals). After considering the submissions of the assessee in the context of facts and material on record, learned Commissioner (Appeals) directed the AO to restrict the disallowance to only the profit element embedded in such purchases by estimating the same at 12.5%. 4. We have considered rival submissions and perused the material on record. On a reading of the assessment order, it becomes clear that in response to query raised by the AO, the assessee had furnished various details including before the AO. The only reason shown by the AO for not accepting the purchases as genuine is, concerned selling dealers are untraceable which made the source of purchases unverifiable. Thus, it is very much clear that the fact that the asessee had purchased the disputed goods is not in doubt, but what is in doubt is the source of such purchases. In such circumstances, the entire purchases made by the assessee cannot be disallowed, but only the profit element embedded in such purchases can be considered for disallowance to take care of any leakage in revenue on account of purchases being made by the assessee from unverifiable source by suppressing actual profit. That being the case, the decision of learned Commissioner (Appeals) in restricting the disallowance to 12.5%, being the estimated profit element imbedded in the alleged non–genuine purchases, in our view, is just and proper. Hence, deserves to be upheld. Accordingly, we do so. grounds are dismissed.