ITO 15(3)(3), MUMBAI vs. JATINDER S MATHARU, MUMBAI

When the case was called for hearing, none appeared on behalf of the respondent assessee. Therefore, I proceed to dispose off the appeal ex–parte qua the assessee after hearing the learned Departmental Representative and on the basis of material on record.

The only issue raised in the present appeal relates partial reduction of addition made on account of non–genuine purchases.

Brief facts are, the assessee is an individual carrying on business in manufacturing of cold mill machinery, rolling mill machinery and rolling mill equipment. For the assessment year under dispute, the assessee filed his return of income in the regular course on 29th September 2009, declaring total income of `8,14,949. Subsequently, on the basis of information received from the Sales Tax authorities through the Investigation Wing of the Department indicating that the assessee is a beneficiary of accommodation entries provided by hawala operators through bogus purchase bills, the Assessing Officer re– opened the assessment under section 147 of the Income Tax Act, 1961 (for short "the Act"). During the assessment proceedings, the Assessing Officer called upon the assessee to prove the genuineness of purchases worth `4,26,949, claimed to have been made during the year from two parties. Further, to independently verify the genuineness of such purchases, the Assessing Officer issued notices under section 133(6) of the Act to the selling dealers calling for certain information, however, all such notices returned back unserved. Even, the Assessing Officer was not satisfied with the evidences furnished by the assessee to establish the genuineness of purchases. Thus,

After considering the submissions of the assessee in the context of facts and material on record, learned Commissioner (Appeals) restricted the disallowance made by the Assessing Officer to 12.5% of the alleged non–genuine purchases.

Before me, the learned Departmental Representative strongly relied upon the observations of the Assessing Officer and submitted that the assessee having failed to prove the genuineness of purchases, the entire amount representing such purchases has to be added.

Having considered the submissions of the learned Departmental Representative, I find that though the assessee may not have been able to prove the genuineness of purchases from the declared source, however, it is a fact on record that the Assessing Officer has not disputed the consumption of material and sale turnover declared by the assessee. Therefore, it goes to prove that the assessee must have purchased goods from some other undisclosed source. In such circumstances, the entire purchases cannot be disallowed, but only the profit element embedded in such purchases can be considered for 4 Smt. Jatinder S. Matharu addition. Therefore, keeping in view the decision of the Tribunal in identical nature of cases, the decision of learned Commissioner (Appeals) to restrict the disallowance to 12.5% of the non–genuine purchase is fair and reasonable requiring no interference from this forum. Accordingly, I uphold the order of learned Commissioner (Appeals) by dismissing the grounds raised by the Revenue.