ITO 26(1)(5), MUMBAI vs. SHRI. GUL NARAINDAS MULCHANDANI, MUMBAI

The only common dispute in both the appeals relate to partial relief granted by learned Commissioner (Appeals) in the matter of addition made on account of non–genuine purchases.

Brief facts, which are common in both the appeals are, the assessee, an individual, is stated to be engaged in the business of trading in textiles. For the assessment years under consideration, the assessee had filed his returns of income in regular course which were processed under section 143(1) of the Act. Subsequently, the Assessing Officer received information from the Sales Tax Department through Investigation Wing to the effect that the assessee is a beneficiary of accommodation bills by way of non–genuine purchases amounting to ` 3,40,275 in assessment year 2010–11 and ` 40,063 in assessment year 2011–12. On the basis of such information, the Assessing Officer re–opened the assessments under section 147 of the Act. During the assessment proceedings the Assessing Officer called upon the assessee to prove the genuineness of purchases. Though, the assessee furnished some documentary evidences, however, they were not to the satisfaction of the Assessing Officer. Further, as observed by the Assessing Officer, notices issued under section 133(6) of the Act to independently verify the genuineness of purchases also returned back un–served. Thus, the Assessing Officer ultimately concluded that the purchases are non–genuine. However, considering the fact that the 3 Shri Gul Naraindas Mulchandani assessee had effected corresponding sales, the Assessing Officer concluded that the assessee was in possession of the disputed goods. Therefore, instead of disallowing the entire purchases, he disallowed 20% and 21.27% of the alleged non–genuine purchases in assessment years 2010–11 and 2011–12 respectively. Effectively, the Assessing Officer disallowed an amount of ` 68,055 in assessment year 2010–11 and ` 8,521 in assessment year 2011–12. The assessee contested the aforesaid disallowances before learned Commissioner (Appeals).

After considering the submissions of the assessee in the context of the facts and material on record, learned Commissioner (Appeals) restricted the disallowance to 12.5% of the alleged non–genuine purchases in both the assessment years under dispute.

I have considered rival submissions the material on record. Though, it may be a fact that the assessee was unable to furnish complete evidences to conclusively prove the source of purchases, however, the fact that the assessee had purchased the goods, possibly from unverified sources, has not been disputed by the Assessing Officer since he has accepted that the disputed goods representing such purchases were in possession of the assessee. Therefore, instead of disallowing the entire purchases, he has restricted the disallowance to gross profit rate declared by the assessee. Whereas, learned

In the result, appeals are dismissed. Order pronounced on 16.02.2021