ITO, 27(1)(5), MUMBAI vs. JITENDRA D. SHAH HUF, MUMBAI

O R D E R PER C.N. PRASAD (JM) 1. This appeal is filed by the revenue against the order of the Learned Commissioner of Income Tax (Appeals) – 26, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 21.12.2018 for the A.Y. 2009-10 in restricting the disallowance to 8% of purchases of ₹.1,06,80,488/- as against the 12.5% of purchases disallowed as non-genuine/bogus by the Assessing Officer.

(A.Y: 2009-10) Jitendra D. Shah HUF 2. Briefly stated the facts are that, the assessee is a proprietor of M/s. K.J. Enterprises which is engaged in the business of trading in iron and steel, filed return of income for the A.Y.2009-10 on 15.09.2009 declaring income of ₹.3,22,980/- and the return was processed u/s. 143(1) of the Act. Subsequently, Assessing Officer received information from the DGIT (Inv.,), Mumbai about the accommodation entries provided by various dealers and assessee was also one of the beneficiary from those dealers. The assessment was reopened U/s. 147 of the Act based on the information received from DGIT(Inv.) Mumbai, that the assessee has availed accommodation entries from various dealers who are said to be providing accommodation entries without there being transportation of any goods. In the re-assessment proceedings, the assessee was required to prove the genuineness of the purchases made from the parties which are referred in the Assessment Order. In response, assessee has submitted copies of bills of the parties and submitted that the purchases made are genuine. Assessee further submitted that the payments are made through account payee cheques as such contended that all the purchases are genuine. However, parties were not produced before the Assessing Officer.

(A.Y: 2009-10) Jitendra D. Shah HUF 3. Not convinced with the submissions of the assessee the Assessing Officer treated the purchases as non-genuine and he was of the opinion that assessee had obtained only accommodation entries without there being any transportation of materials and the assessee might have made purchases in the gray market. It is the finding of the Assessing Officer since the purchases made by the assessee and claimed as expenses in his Profit and Loss Account are not genuine, the purchases to that extent remained unverifiable. Assessing Officer observed that the notice issued u/s. 133(6) of the Act to the parties were returned unserved with a remark “left/Not Known” and the assessee did not produced the parties before the Assessing Officer. Therefore, Assessing Officer treated purchases of ₹.13,35,061/- being 12.5% of ₹.1,06,80,488/- as non-genuine and added to the income of the assessee. On appeal the Ld.CIT(A) considering the evidences and various submissions of the assessee restricted the disallowance to an extent of 8% of the non-genuine purchases.

(A.Y: 2009-10) Jitendra D. Shah HUF 5. We have heard the rival submissions, perused the orders of the authorities below. On a perusal of the order of the Ld.CIT(A), we find that the Ld.CIT(A) considered this aspect of the matter with reference to the submissions of the assessee and the averments in the Assessment Order restricted the disallowance to 8% of the non-genuine purchases of ₹.1,06,80,488/-, while holding so, the Ld.CIT(A) observed as under: - “7.1 The only effective ground of appeal pertains to addition @12.5% of bogus purchases of Rs.13,35,061/-. 7.2 I have considered the facts of the case and the appellant's submissions. 7.3. During the appellate proceedings, the Authorized Representative stated that in the Assessee's own case in personal capacity for AY.2009-10, the Hon'ble ITAT SMC Bench Mumbai vide order dated 07/05/2018 has estimated the profit margin at 8%. Further, following the order of ITAT, CIT(A)-25, Mumbai has restricted profit at 8% in the case of HUF as well as Individual case. Thus following the decision of Hon'ble, ITAT Mumbai, the addition in terms of unexplained expenditure is restricted to 8% of Rs. 1,06,80,488/- Hence, the appellant's Ground of appeal is "Partly Allowed".

6. As could be seen from the above, it is observed that in assessee’s own case for the A.Y: 2009-10 in ITA.No. 759/MUM/2018 dated 07.05.2018 the Tribunal considering the nature of business of the assessee restricted the profit rate at the rate of 8%. Following the principle of consistency Ld.CIT(A) restricted the disallowance to 8%. On a careful perusal of the order of the Ld.CIT(A) and the reasons given (A.Y: 2009-10) Jitendra D. Shah HUF therein, we do not find any infirmity in the order passed by the Ld.CIT(A) in restricting the addition/disallowance to the extent of 8% of the purchases. Grounds raised by the revenue are dismissed.

Order pronounced on 29.09.2020 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board.