ITO 28 (2)(3), MUMBAI vs. NATHU DAGDU DAHIBHATE, MUMBAI

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

Briefly the facts are, the assessee is an individual and is stated to be engaged in the business of manufacturing of control panels through his proprietary concern, M/s Classic Electricals. For the assessment year under dispute, assessee had filed his return of income on 30-09-2011 declaring total income of Rs.3,05,660/-. Subsequently, the assessing officer received information from the Sales-tax Department,Government of Maharashtra through the DGIT (Inv), Mumbai that purchases worth Rs.20,48,435/- claimed to have been made during the year from four parties are non-genuine, as, the concerned selling dealers were identified as hawala operators providing accommodation bills. On the basis of such information, assessing officer reopened the assessment under section 147 of the Income Tax Act, 1961. In course of assessment proceedings, assessing officer called upon the assessee to prove the genuineness of the transactions through supporting evidence. In response to the query made, the assessee furnished audited financial statement, ledger copies of the concerned selling dealer,etc. However, as alleged by the assessing officer, the assessee did not submit details of goods purchased, stock register, sales register, bank account statements, etc. Further, as observed by the assessing officer, notices issued under section 133(6) of the Act to the concerned selling dealers returned back unserved. Thus, ultimately, the assessing officer concluded that the purchases are non-genuine and accordingly, added back to the income of the assessee. Assessee contested the aforesaid addition before the first appellate authority. After considering the submissions of the assessee in the context of facts and materials on record, learned Commissioner of Income-tax (Appeals) restricted the disallowance to 12.5% of the alleged non genuine purchases.

We have considered the submissions of learned Departmental Representative and perused materials on record. As rightly observed by learned Commissioner of Income-tax (Appeals), the sales shown by the assessee have not been doubted by the assessing officer. That being the case, the logical conclusion would be, in absence of the disputed purchases corresponding sales could not have been made. Therefore, the doubt, if any, is only with regard to the source of purchases. In the aforesaid scenario, it can be concluded that the assessee might have purchased the goods from unverified sources, thereby, suppressing its true profits. In such circumstances, only the profit element embedded in such unverified purchases can be considered for addition. In the instant case, learned Commissioner of Income-tax (Appeals) has exactly done so. Insofar as estimation of profit element at 12.5%, in our view, it is fair and reasonable and is in conformity with the decisions of the higher appellate authorities including Tribunal in similar matters.

In view of the aforesaid, we uphold the decision of learned Commissioner of Income-tax (Appeals) on the issue. Grounds raised