ITO 21 (1)(5), MUMBAI vs. M/S ILLUMINATION ENTERPRISES, MUMBAI

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

Briefly the facts are, the assessee, a partnership firm, is stated to be engaged in the business of specialization in lighting system. For the assessment year under dispute, assessee filed its return of income on 25-09-2009 declaring total income of Rs.19,82,050/-. The return of income filed by the assessee was initially processed u/s 143(1) of the Act. Subsequently, the assessing officer received information from the sales-tax department through Investigation Wing that the assessee is a beneficiary of accommodation bills representing purchases worth Rs.3,27,940/- from seven parties identified as hawala operators. On the basis of such information, the assessing officer reopened the assessment under section 147 of the Act. During the assessment proceedings, the assessing officer called upon the assessee to prove the genuineness of the disputed purchases. Further, to independently verify the purchases, the assessing officer issued notices under section 133(6) of the Act to the concerned parties. However, as alleged by the assessing officer, all such notices returned back unserved. Further, the documentary evidences furnished by the assessee also could not satisfy the assessing officer regarding the genuineness of the purchases. Therefore, the assessing officer treated the purchases as non genuine. Having held so, the assessing officer disallowed 40% out of such purchases and added back an amount of Rs.1,31,176/- to the income of the assessee. Assessee contested the aforesaid addition before learned Commissioner (Appeals). After considering the submissions of the assessee in the context of facts and materials on record, learned Commissioner (Appeals) reduced the disallowance to 20% of the alleged non genuine purchases.

The learned Departmental Representative submitted, the assessee having not proved the fact that purchases made from the concerned parties are genuine, the disallowance made by the assessing officer should have been upheld.

I have heard learned Departmental Representative and perused materials on record. Undisputedly, the assessing officer was in possession of certain information from the Sales-Tax department which indicated that certain purchases made by the assessee were non genuine. However, in course of assessment proceedings, as noted by the assessing officer, the assessee had furnished purchase invoices, ledger account copies, copies of delivery challan, copies of bank statement showing payment made to the selling dealers, etc. Further, it is a fact that the sales effected by the assessee has not been disputed. Thus, the doubt entertained by the assessing officer was only with regard to the source of purchases. For this reason alone, instead of disallowing the entire purchases, the assessing officer has disallowed 40% out of such purchases which has been reduced to 20% by learned Commissioner (Appeals). Thus, the dispute is only with regard to the quantum of disallowance to be made. After considering all relevant facts, I am of the opinion that disallowance made at 40% by the assessing officer is on a much higher side. Therefore, I am inclined to uphold the decision of learned Commissioner (Appeals) in restricting the disallowance to 20% of the alleged non genuine purchases. Grounds are dismissed.

In the result, appeal is dismissed.