ITO-20(1)(1), MUMBAI vs. SHRI. ANOOP OKHIMJI SHETHIA (HUF), 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.

Brief facts are, the assessee is a Hindu Undivided Family (HUF) and is engaged in the business of trading in iron and steel as well as mild steel (M.S.) plates. For the assessment year under dispute, the assessee filed its return of income on 26th September 2010 declaring total income of ` 18,97,650. Subsequently, on the basis of information received from the Sales Tax Department through DGIT (Inv.), Mumbai, indicating that purchases worth ` 3,01,11,494, claimed to have been made during the year from 10 parties are non–genuine, as the concerned parties have been identified as hawala operators by the Sales Tax Department and are only providing accommodation bills, 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 by furnishing certain supporting evidences. As observed by the Assessing Officer, the assessee was unable to furnish all the supporting evidences called for. Therefore, the Assessing Officer ultimately concluded that the purchases made by the assessee are non–genuine. However, relying upon some judicial precedents the Assessing Officer disallowed 25% of the alleged non–genuine purchases and made

After considering the submissions of the assessee in the context of the facts and material on record, learned Commissioner (Appeals) restricted the addition to ` 19,87,359, being 6.6% of the alleged non– genuine purchases.

We have carefully considered rival submissions and perused the material on record. The factual matrix reveals that, though, the Assessing Officer held certain purchases claimed to have been made by the assessee as non–genuine, however, he has not doubted the sales turnover shown by the assessee. This, in other words, means that the assessee has effected corresponding sales against the purchases treated as non–genuine. For this reason alone, the Assessing Officer instead of disallowing the entire purchases has disallowed 25% out of such purchases. Learned Commissioner (Appeals) having found that the VAT rate on goods purchased by the assessee is 4%, whereas, the assessee has a fall in gross profit rate shown at 5.9% in the impugned assessment year compared to the previous two years, has restricted the disallowance to 6.6% being the difference between the profit element generally estimated in case of 4 Shri Anoop Okhimji Shethia (HUF)

In the result, appeal is dismissed. Order pronounced in the open court on 14.12.2020