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Income Tax Appellate Tribunal, “SMC BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY
The aforesaid appeal has been filed by the Revenue challenging the order dated 19th December 2018, passed by the learned Commissioner of Income Tax (Appeals)–26, Mumbai, pertaining to the assessment year 2009–10.
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 Shri Babasaheb Ashok Jagtap
Brief facts are, the assessee, an individual, is engaged in the business of trading in construction material, chemicals, silicon and building material through its proprietary concern Beacon Enterprises. For the assessment year under dispute, the assessee filed his return of income on 30th September 2009, declaring total income of ` 5,01,092. 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 ` 4,75,004, claimed to have been made during the year from three parties, are non–genuine as the concerned parties were identified as a hawala operators, the Assessing Officer re–opened the assessment under section 147 of the Act. During the assessment proceedings, the Assessing Officer through notice issued under section 142(1) and 143(2) of the Act 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 Officer also issued notices under section 133(6) of the Act to the concerned parties. However, as alleged by the Assessing Officer, all such notices returned back un–served. Further, it is alleged by the Assessing Officer that in response to the statutory notices issued, no one appeared on behalf of the assessee to prove the genuineness of 3 Shri Babasaheb Ashok Jagtap such purchases. Accordingly, the Assessing Officer proceeded to complete the assessment to the best of his judgment by invoking the provisions of section 144 of the Act. While doing so, he treated the entire purchases of ` 4,75,004, as non–genuine and added back to the income of the assessee. Being aggrieved with such addition, the assessee preferred appeal before the first appellate authority.
In the course of proceedings before learned Commissioner (Appeals), the assessee furnished purchase bills, bank statement, etc. to prove the genuineness of purchases. Learned Commissioner (Appeals), though, was not convinced with such evidences, however, considering the fact that the sales effected by the assessee were not doubted or proved to be non–genuine, he concluded that the assessee might have purchased the goods from grey market, as otherwise, in the absence of such purchases, the assessee could not have effected corresponding sales. Therefore, relying upon the decision of the Hon’ble Gujarat High Court, in CIT v/s Simit P. Sheth, 356 ITR 451 (Guj.), he proceeded to restrict the addition to the profit element embedded in the alleged non–genuine purchases by estimating @ 12.5% of such purchases.
I have considered rival submissions and perused the material on record. Undisputedly, since in response to the statutory notices issued
4 Shri Babasaheb Ashok Jagtap by the Assessing Officer no one appeared on behalf of the assessee, he proceeded to complete the assessment ex–parte, to the best of his judgment under section 144 r/w section 147 of the Act by treating the disputed purchases as non–genuine and adding back to the income of the assessee. However, it is a fact that before learned Commissioner (Appeals), the assessee appeared and furnished some documentary evidences, such as, purchase invoices, evidence of payment made through cheque, etc., to prove the genuineness of such purchases. Though, such evidences could not fully convince learned Commissioner (Appeals) with regard to the genuineness of purchases, however, it is a fact on record that the sales effected by the assessee during the year were not disputed or doubted by the Assessing Officer. Therefore, logical conclusion would be, the assessee must have purchased the goods from some unverified sources. In such situation, the entire purchases cannot be disallowed, as, by indulging in such activity what the assessee might have gained is some profit margin. Therefore, in my considered opinion, learned Commissioner (Appeals) was justified in restricting the addition to the profit element embedded in the alleged non–genuine purchases. Therefore, by upholding the decision of learned Commissioner (Appeals), I dismiss the grounds raised by the Revenue.
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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