ITO WARD 3 (5), KALYAN vs. SHRI. RUPESH P SHAH, THANE

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

Brief facts are, the assessee an individual is engaged in the business of trading in electrical and hardware goods. For the 2 Shri Rupesh P. Shah assessment year under dispute, the assessee filed his return of income on 30th September 2009, declaring total income of ` 3,44,147. Initially, the return of income filed by the assessee was processed under section 143(1) of the Act. Subsequently, on the basis of information received from the Sales Tax Department through DGIT (Inv.), Pune, that purchases worth ` 3,33,892, claimed to have been made during the year from four parties are non–genuine, 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 such purchases, since, as per the information received from the DGIT (Inv.), Mumbai, the selling dealers have been identified as hawala operators providing accommodation bills. In response to the query raised by the Assessing Officer, the assessee furnished some documentary evidences which were not to the satisfaction of the Assessing Officer. Therefore, he treated the purchases of ` 3,33,892, as unexplained expenditure under section 69C of the Act and added back to the income of the assessee. The aforesaid addition made by the Assessing Officer was contested by the assessee before the first appellate authority.

After considering the submissions of the assessee in the context of facts and material on record and relying upon certain judicial precedents, learned Commissioner (Appeals) restricted the 3 Shri Rupesh P. Shah disallowance to 10% of the alleged non–genuine purchases. In other words, learned Commissioner (Appeals) restricted the disallowance to ` 33,389.

I have carefully considered the rival submissions and perused the material on record. Though, it may be a fact that the Assessing Officer was in possession of information revealing that certain purchases made by the assessee are non–genuine and further, the assessee was unable to conclusively prove the purchases with supporting evidences, however, fact remains, the sales turnover disclosed by the assessee has not been doubted by the Assessing Officer. Therefore, the doubt if any is with regard to the source of purchase. It may be a fact that the assessee might have purchased the goods from grey market without paying VAT, thereby, suppressing a part of its profit. Considering the aforesaid factual position, learned Commissioner (Appeals) has decided to bring the profit element embedded in such purchase to tax by estimating at 10%. Since the aforesaid decision of learned Commissioner (Appeals) is in conformity with the ratio laid down in various judicial precedents, I am inclined to uphold the same. Accordingly, grounds raised by the Revenue are dismissed.

In the result, appeal is dismissed. Order pronounced in the open court on 17.12.2020