Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY
This is an appeal by the assessee against the order dated 24-05-2019 of learned Commissioner of Income Tax (Appeals)-7, Mumbai for the assessment year 2010-11. 2. The dispute in the present appeal is confined to disallowance made on account of non genuine purchases. Pertinently, though, the assessee has raised ground 2 challenging the ex parte disposal of appeal; however, at the time of 2 ITA 4925/Mum/2019 hearing, learned Authorised Representative did not press this ground and requested the Bench to decide the appeal on merits.
Briefly the facts are, the assessee is a partnership firm and engaged in the business of trading in ferrous and non ferrous metals. For the assessment year under dispute, assessee filed its return of income on 20-09-2010 declaring total income of Rs.6,43,403/-. Subsequently, the Assessing Officer received information from the sales-tax department through the Investigation Wing of the department that purchases worth Rs.1,01,49,312/- claimed to have been made during the year from 12 parties are non genuine, as the concerned parties instead of making actual sale transaction, are only providing accommodation bills. On the basis of such information, 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 through proper evidence. Though, the assessee produced some evidences to prove the purchases; however, they were not to the satisfaction of the Assessing Officer. Therefore, he treated the purchases as non genuine. After rejecting the books of account of the assessee, the Assessing Officer proceeded to disallow 12.5% of the alleged non genuine purchases on the reasoning that there is every possibility that the assessee must have inflated the price of goods. Thus, he disallowed an amount of Rs.12,68,664/- out of the alleged non genuine purchases. The aforesaid disallowance made by the Assessing Officer was also sustained by learned Commissioner (Appeals).
The learned Counsel for the assessee submitted, in course of assessment proceedings, the assessee has furnished various documentary evidences to prove the genuineness of purchases. He submitted, the quantitative tally of purchase
3 ITA 4925/Mum/2019 and sales are also furnished before the departmental authorities. Therefore, there cannot be any doubt regarding the fact that the assessee has purchased the goods. He submitted, merely because some documentary evidences could not be furnished, the purchases cannot be held as non genuine. Further, he submitted, the normal profit rate in this line of business varies between 2% to 5%. Therefore, disallowance at 12.5% is high and excessive. Finally, he submitted, in case of one of the partners of the firm in similar line of business, the Tribunal in dated 14-12-2018, has restricted the disallowance to 5% of the non genuine purchases. Thus, he submitted, the disallowance made by the departmental authorities should be scaled down to a reasonable rate.
The learned Departmental Representative strongly relied upon the observations of the Assessing Officer and learned Commissioner (Appeals). She submitted, the assessee having failed to prove the genuineness of purchases, disallowance made at 12.5% is reasonable.
I have considered rival submissions and perused materials on record. Though, it may be a fact that the assessee was unable to furnish documentary evidence to the satisfaction of the Assessing Officer to prove the genuineness of purchases made, however, it is also a fact that the sales made by the assessee have not been doubted. This pre-supposes that in absence of the purchases, the assessee could not have effected corresponding sales. Even, the Assessing Officer was also convinced with this fact. Hence, instead of disallowing the entire purchases, he disallowed only the profit element by estimating at 12.5%. Therefore, the issue before me is, whether the disallowance made at 12.5% is reasonable? Keeping in view the nature of business carried on by the assessee and the profit rate normally attached to such line of business, I am of the 4 ITA 4925/Mum/2019 considered opinion that disallowance at 5% of the alleged non genuine purchases would be fair and reasonable. Accordingly, I direct the Assessing Officer to restrict the disallowance to 5% of the alleged non genuine purchases. This ground is partly allowed. 7. In the result, appeal is partly allowed.