ITO 3 (2)(4), MUMBAI vs. M/S OHM PACKAGING PVT LTD., MUMBAI

Briefly the facts are, the assessee is a resident company and is engaged in manufacturing and sale of Kraft Line bags and liners. For the assessment year under dispute, assessee filed its return of income on 13-01-2010 declaring total income of Rs.12,40,189/- under the normal provisions and book profit at Rs.15,73,309/- under the provisions of section 115JB of the Income-tax Act, 1961. The return of income filed by the assessee was processed under section 143(1) of the Act. Subsequently, on the basis of information received from the sales-tax department, the Assessing Officer found that purchases worth Rs.1,65,094/- from M/s V.V. Corporation are non genuine, as the said party provides accommodation entries. On the basis of such information, the Assessing Officer reopened the assessment under section 147 of the Act. In course of assessment proceedings, the Assessing Officer called upon the assessee to prove the genuineness of purchases made from M/s V.V. Corporation. Though, the assessee furnished some documentary evidences to prove the purchases; however, the Assessing Officer was not convinced. Further, he alleged that the notice issued under section 133(6) of the Act to the selling dealer returned back unserved. Thus, ultimately, he treated the purchases of Rs.1,65,094/- as non genuine and added back to the income of the assessee. Assessee contested 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) restricted the addition to 12.5% of the alleged non genuine purchases. Effectively, he disallowed an amount of Rs.20,637/-. Being aggrieved, revenue is before us.

Heard learned Departmental Representative and perused the materials on record. Though, it may be a fact that the assessing officer has received information from the sales-tax department that disputed purchases are non genuine and further, the assessee was unable to prove the genuineness of purchases to the satisfaction of the Assessing Officer, however, it is a fact on record that the Assessing Officer has not disputed either the consumption of goods or sales effected by the assessee. Thus, it has to be accepted that the disputed purchases have entered assessee’s stock and utilized in the manufacturing process and ultimately resulting in sales. Therefore, in such circumstances, only the profit element embedded in such purchases can be considered for addition. That being the case, I fully agree with the decision of 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.