ITO 26 (1)(1), MUMBAI vs. AMARNATH MANJAYA SHETTY, MUMBAI

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ITA 1988/MUM/2019Status: DisposedITAT Mumbai05 October 2020AY 2011-125 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to restrict the disallowance to 15.74% of the non-genuine purchases, agreeing that the estimation of profit by the AO was on the higher side.

What were the facts?

The Assessing Officer reopened the assessment based on information that purchases from a particular party were non-genuine. The assessee provided some evidence, but the AO disallowed 25% of the purchases. The CIT(A) further restricted this disallowance to 15.74%.

What were the issues?

The primary issue was the genuineness of purchases and the extent of disallowance to be made when purchases were found to be partly non-genuine.

Which sections of the Income-tax Act were involved?

Section 147,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY

For Respondent: Shri Udaya Bhaskar Jakke

The aforesaid appeal has been filed by the Revenue challenging the order dated 26th October 2018, passed by the learned Commissioner of Income Tax (Appeals)–38, Mumbai, pertaining to the assessment year 2009–10.

2.

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

2 Amarnath Manjaya Shetty 3. When the appeal was called for hearing, no one was present on behalf of the respondent assessee to represent the case. There is no application seeking adjournment either. Considering the nature of dispute, I proceed to dispose off the appeals ex–parte qua the respondent assessee after hearing the learned Departmental Representative and on the basis of material available on record.

4.

Brief facts are, the assessee, an individual, is engaged in the business of manufacturing air conditioning and refrigerator equipment through his proprietary concern Sujata Enterprises. For the assessment year under dispute, the assessee filed his return of income on 29th September 2011, declaring total income of ` 5,61,700. The return of income so filed by the assessee was initially processed under section 143(1) of the Act. Subsequently, on the basis of information received from the Sales Tax Department, Government of Maharashtra, through DGIT (Inv.), Mumbai, that purchases worth ` 16,72,709, claimed to have been made during the year from Rajeshwari Metal Industries are non–genuine as the concerned party was identified as a hawala operator, the Assessing Officer re–opened the assessment under section 147 of the Act. During the assessment proceedings, the Assessing Officer called upon the assessee to prove the genuineness of such purchases through supporting evidence. Further, to independently verify the genuineness of such purchases, the Assessing

3 Amarnath Manjaya Shetty Officer issued notice under section 133(6) of the Act to the concerned party. However, as alleged by the Assessing Officer, no reply was received from the party concerned in response to such notice. Not being satisfied with the evidences furnished by the assessee, the Assessing Officer ultimately concluded that the purchases are non– genuine. However, the Assessing Officer ultimately disallowed 25% out of such purchases working out to ` 4,18,177, and added back to the income of the assessee. The assessee challenged the aforesaid addition before the first appellate authority.

5.

After considering the submissions of the assessee in the context of the facts and material on record, learned Commissioner (Appeals) restricted the addition to 15.74% of the alleged non–genuine purchases.

6.

I have heard the learned Departmental Representative and perused the material on record. It is evident, the doubt regarding the genuineness of the disputed purchases was on the basis of information received from the Sales Tax Department, Government of Maharashtra. However, the Assessing Officer has accepted the fact that the assessee has produced some supporting evidence to prove the genuineness of purchases. The only reason for which he did not accept the purchases to be genuine is, the assessee neither could produce the concerned parties nor could furnish transportation bills, weighment bills, etc.

4 Amarnath Manjaya Shetty However, the very fact that the Assessing Officer did not disallow the entire purchase but has restricted the disallowance to 25% of the alleged non–genuine purchases indicates that the Assessing Officer also believes that the assessee had purchased the goods, though, may not be from the declared source. Therefore, he has proceeded to add the profit element embedded in such purchases. However, the estimation of profit @ 25% in my view is on much higher side. Therefore, I fully agree with learned Commissioner (Appeals) in restrict the disallowance to 15.74% of the non–genuine purchases. Accordingly, the order of learned Commissioner (Appeals) is upheld by dismissing the grounds raised by the Revenue.

7.

In the result, appeal is dismissed. Order pronounced through notice board under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963, on 08.10.2020

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