ACIT 28(3), MUMBAI vs. SHRI SALIM AHMED ALIMAHMED, MUMBAI

Briefly stated, the assessee who is engaged in the business of fabrication had filed his return of income for A.Y. 2009-10 on 16.09.2009, declaring a total income of Rs.38,61,820/-. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Subsequently, on the basis of information received from the office of DGIT(Inv.), Mumbai that the assessee as a beneficiary had obtained accommodation entries for purchases of Rs.79,91,100/-, his case was reopened under Sec. 147 of the Act.

During the course of the assessment proceedings it was observed by the A.O that the assessee had claimed to have made purchase of Rs.79,91,100/- from M/s Swastik Impex, a party which as per the information shared by the Sales tax department was a concern that was black listed for allegedly providing accommodation bills. On being called upon to substantiate the authenticity of the aforesaid purchase transaction the assessee placed on record the copies of the purchase bills along with a statement of reconciliation of sales corresponding thereto. Further, the assessee in order to substantiate the genuineness and veracity of the aforesaid purchase transaction took support of the fact that the payments of the purchase consideration was made to the aforementioned party through cheques. However, no delivery challans or transportation details were submitted by the assessee. Also, as is discernible from the records the assessee despite specific direction failed to produce the aforesaid supplier party for examination before the A.O. In the backdrop of the aforesaid facts, the A.O held a conviction that the assessee had failed to substantiate the genuineness and veracity of the purchases that 3 ACIT-28(3) Vs. Shri Salim Ahmed Alimahmed were claimed to have been made from the aforementioned party. At the same time, taking cognizance of the fact that the assessee had accounted for the corresponding sales pertaining to the impugned purchases, the A.O was of the view that the assessee had procured the goods under consideration not from the aforementioned party but from certain undisclosed parties operating in the open/grey market. Backed by his said conviction, the A.O after considering the GP rate of 23.3% that was offered by the assessee in its return of income therein applied the same to the impugned purchases and worked out the disallowance at Rs.24,34,089/-. After making the aforesaid addition/disallowance the income of the assessee was computed at Rs.62,95,910/- by the A.O vide his order passed under Sec. 143(3) r.w.s 147, dated 13.03.2015.

Aggrieved, the assessee assailed the assessment order before the CIT(A). After deliberating on the facts of the case, though the CIT(A) concurred with the view taken by the A.O that the assessee had failed to substantiate the authenticity of the impugned purchase transactions, but at the same time he scaled down the addition/disallowance towards the profit which the assessee would had made by procuring the goods in question at a discounted value from the open/grey market to 12.5% of the aggregate value of the alleged bogus purchases.

The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. Admittedly, it is a matter of fact borne from the records that the assessee had failed to substantiate the genuineness and veracity of the impugned purchases under consideration. At the same time, the lower authorities not being oblivious of the fact that the assessee had dully accounted for the sales corresponding to the impugned purchases in his books of account had thus concluded that assessee had purchased the goods not from the aforesaid supplier party but from the suppliers operating in the open/grey market. Accordingly, for quantifying the profit involved in making of the impugned purchases by the assessee at a discounted price as against

The appeal of the revenue is dismissed.