DCIT 33(3) , MUMBAI vs. SHRI. UTPALKUMAR R CHAUDHARI , MUMBAI

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

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, we proceed to dispose off the appeal ex–parte qua the assessee after hearing the learned Departmental Representative and on the basis of material available on record.

Brief facts are, the assessee, an individual, is engaged in trading of business promotional gift items through his proprietary concern Western Sales Corporation. For the assessment year under dispute, the assessee filed his return of income on 2nd June 2009, declaring total income of ` 14,06,960. The return of income was initially processed under section 143(1) of the Act. Subsequently, on the basis of information received from the Sales Tax Department through DGIT (Inv.), Mumbai, that the assessee is a beneficiary of accommodation bills issued by certain entities identified as hawala operators by the Sales Tax Department, Government of Maharashtra, 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 purchases worth ` 8,57,867, claimed to have been made during the year from two parties. As alleged by the Assessing Officer, the assessee was unable to prove the Shri Utpal Kumar R. Chaudhari genuineness of purchases by furnishing any transportation bill or stock register. Further, he observed, before the Sales Tax Authorities the concerned parties have admitted that they were providing accommodation bills. In addition, the Assessing Officer observed that the notices issued under section 133(6) of the Act to the concerned parties seeking information regarding the purchases returned back unserved. Thus, on the basis of the aforesaid observations, the Assessing Officer concluded that purchases worth ` 8,57,867, has to be disallowed as unexplained expenditure. Proceeding further, the Assessing Officer also went on to examine the genuineness of other purchases claimed to have been made during the year under consideration where the selling dealers have not been identified as hawala operators. Alleging that the assessee was unable to prove the genuineness of such purchases through proper documentary evidences and further, the notices issued under section 133(6) of the Act were not responded to, the Assessing Officer also disallowed purchases worth ` 67,22,680. Being aggrieved with such disallowance, the assessee preferred appeal before the first appellate authority.

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 non–genuine purchases.

We have heard the learned Departmental Representative and perused the material on record. As could be seen from the observations of the Assessing Officer in the assessment order, insofar as purchases worth ` 8,57,867 identified as bogus purchase on the basis of information received from the Sales Tax Department, in response to the query raised by the Assessing Officer the assessee had furnished purchase bills, delivery challans, ledger account copy, bank statement showing payment etc. The only reason for which the Assessing Officer disallowed such purchases is, such parties have admitted before the Sales Tax authorities that they were providing accommodation bills and secondly, the assessee could not furnish the transportation bills. As regards purchases made from other parties who were not appearing as hawala operators in the list maintained by the Sales Tax Department, only because the notices issued under Shri Utpal Kumar R. Chaudhari section 133(6) of the Act returned back un–served and some documentary evidences could not be furnished by the assessee, the Assessing Officer has treated them as bogus. However, it is not disputed that the sales effected by the assessee have not been doubted or disputed by the Assessing Officer. Further, as recorded by learned Commissioner (Appeals), one of the selling dealers, Sharp Print in response to the notice issued under section 133(6) of the Act, has not only confirmed the sales effected but has also furnished supporting documentary evidences. Keeping in view the aforesaid facts, we fully agree with learned Commissioner (Appeals) that under the given facts and circumstances, the entire purchases made by the assessee could not be disallowed but only the profit element embedded in such purchases can be considered for addition. Therefore, we have no hesitation in upholding the decision of the learned Commissioner (Appeals) in restricting the disallowance to 12.5% of the alleged non–genuine purchases. As rightly observed by the learned Commissioner (Appeals), the purchases worth ` 39,88,556, made from Sharp Print having been proved through confirmation and supporting evidences, cannot be treated as bogus. Accordingly, we uphold the decision of learned Commissioner (Appeals) by dismissing the grounds raised by the Revenue.

In the result, appeal is dismissed. Order pronounced through notice board under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963, on 25.09.2020