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Income Tax Appellate Tribunal, “A BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
The aforesaid appeal filed by the Revenue is against the order dated 21st January 2019, passed by the learned Commissioner of Income Tax (Appeals)–45, Mumbai, for the assessment year 2010–11.
At the time of hearing of appeal through virtual mode, no one appeared on behalf of the assessee to argue the case. Considering the 2 Shri Ashok Kumar Shyamlal Gupta nature of dispute and the fact that the appeal is filed by the Revenue, we proceed to dispose of the same after hearing the learned Departmental Representative and on the basis of material on record.
The present appeal has been filed by the Revenue being aggrieved with the decision of learned Commissioner (Appeals) in restricting the addition/disallowance made on account of non–genuine purchases to 12.5% of such purchases.
Brief facts are, the assessee, an individual, is engaged in the business of trading in ferrous and non–ferrous metals through his proprietorship concern Aircraft Enterprises. For the assessment year under dispute, the assessee filed his return of income on 10th October 2010, declaring total income of ` 2,11,120. On the basis of information received from the Sales Tax Department to the DGIT (Inv.), Mumbai, that the assessee is a beneficiary of accommodation bills provided by certain hawala operators in respect of purchases worth ` 2,01,06,486, claimed to have been made during the year under consideration, the Assessing Officer re–opened the assessment under section 147 of the Act. As alleged by the Assessing Officer, in response to the statutory notices issued under section 142(1) and 143(2) of the Act, the assessee did not appear and furnish the required information to prove the genuineness of purchases. Accordingly, the Assessing Officer
3 Shri Ashok Kumar Shyamlal Gupta proceeded to complete the assessment ex–parte to the best of his judgment under section 144 of the Act. While doing so, the Assessing Officer observed that notices issued under section 133(6) of the Act to the concerned selling dealers returned back unserved. As a result of which the genuineness of purchases could not be verified. Thus, after rejecting the books of account of the assessee by invoking the provisions of section 145(3) of the Act, the Assessing Officer concluded that the purchases worth ` 2,01,06,486, remained unexplained and added back under section 69C. Being aggrieved with this addition, the assessee preferred appeal before the first appellate authority.
After considering the submissions of the assessee and in the context of facts and material on record and relying upon certain judicial precedents, and more particularly, the decision of the Hon’ble Gujarat High Court in CIT v/s Simit P. Sheth, [2013] 356 ITR 451 (Guj.), learned Commissioner (Appeals) restricted the addition to 12.5% of the non–genuine purchases.
We have considered the submissions of learned Departmental Representative and perused the material on record. Strongly relying upon the observations of the Assessing Officer, learned Departmental Representative has submitted that since the assessee failed to prove the genuineness of purchases, the entire addition made by the 4 Shri Ashok Kumar Shyamlal Gupta Assessing Officer should be restored. Having gone through the facts on record, we find, though, it may be a fact that the assessee was unable to prove that the purchases were made from the declared source, however, the fact that goods representing such purchases entered the stock of the assessee and corresponding sales were also made has not been disputed. Thus, the aforesaid facts can lead to a conclusion that the assessee might have purchased the goods from some other sources and to regularize such purchases has availed accommodation bills. In such circumstances, the entire purchases alleged to be non– genuine cannot be disallowed, but only the profit element embedded in such purchases could be considered for addition. Therefore, we approve the decision of learned Commissioner (Appeals) in restricting the disallowance to the profit element embedded in the alleged non– genuine purchases. As regards the rate of disallowance applied by learned Commissioner (Appeals) @ 12.5%, we are of the view that looking at the nature of business being carried on by the assessee and the profit rate attached to such line of business as per industry norms, the decision of learned Commissioner (Appeals) to restrict the disallowance to 12.5% of the non–genuine purchases appears to be reasonable, hence does not require any interference by us. In view of the aforesaid, grounds are dismissed.
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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 11.09.2020