DCIT - 19 (1), MUMBAI vs. AAKASH DEVELOPERS, THANE

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ITA 2279/MUM/2019Status: DisposedITAT Mumbai14 December 2020AY 2010-115 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision, stating that only the profit element embedded in non-genuine purchases can be disallowed, not the entire purchase amount. The addition was estimated at 12.5% of the disputed purchases.

What were the facts?

The Assessing Officer added a sum to the assessee's income on account of non-genuine purchases after the assessee failed to produce certain parties and provide complete documentation. The CIT(A) restricted this addition to 12.5% of the disputed purchases.

What were the issues?

Whether the entire amount of purchases can be disallowed when genuineness is doubted, or only the profit element embedded therein.

Which sections of the Income-tax Act were involved?

Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI MANOJ KUMAR AGGARWAL

For Respondent: Shri Brajendra Kumar

The aforesaid appeal has been filed by the Revenue challenging the order dated 31st January 2019, passed by the learned Commissioner of Income Tax (Appeals)–18, Mumbai, pertaining to the assessment year 2010–11.

2.

When the appeal was called for hearing, no one was present on behalf of the respondent assessee to represent the case. There is no 2 Aakash Developers application seeking adjournment either. Considering the nature of dispute, we proceed to dispose off the appeals ex–parte qua the respondent assessee after hearing the learned Departmental Representative and on the basis of material available on record.

3.

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

4.

Brief facts are, the assessee, a partnership firm, is engaged in the business of building construction activity. For the assessment year under dispute, the assessee filed its return of income on 29th September 2010, declaring total income of ` 52,32,960. In the course of assessment proceedings, the Assessing Officer while verifying the return of income filed by the assessee noticed that the assessee has shown construction expenditure of ` 2,23,86,834. After calling for necessary details relating to the claim he found that the assessee has shown purchases worth ` 16,92,976, from 57 parties. To verify genuineness of purchases claimed to have been made, the Assessing Officer issued notices under section 133(6) of the Act to 11 parties on random basis. As observed by the Assessing Officer, out of 11 parties, two of the parties complied with the notices issued under section 133(6) of the Act. However, the notices issued to the rest of the parties returned back un–served. Therefore, the Assessing Officer

3 Aakash Developers called upon the assessee to furnish ledger copy of the parties with VAT/TIN details, copy of bills, delivery challans, proof of payment of transportation expenses, etc. In response to the query raised, the assessee furnished some of the evidences. However, as noted by the Assessing Officer, the assessee could not furnish proof for expenses, goods received note, etc. Further, he observed that as per the information received from the Sales Tax Department, six of the parties have been identified as suspicious dealers. Thus, he called upon the assessee to produce the concerned parties. As the assessee was unable to produce the concerned parties, the Assessing Officer treated purchases worth ` 17,25,699, as non–genuine and added back to the income of the assessee. Aggrieved with such addition, the assessee preferred appeal before the first appellate authority.

5.

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

6.

We have heard the learned Departmental Representative and perused the material on record. As could be seen from the impugned assessment order, out of the total purchases of ` 1,62,92,976 made from 57 parties, the Assessing Officer has ultimately doubted/disbelieved the purchases from six parties amounting to ` 17,25,619. It is further revealed that the doubt/suspicion of the 4 Aakash Developers Assessing Officer on these purchases is primarily due to the information received from the Sales Tax Department. As it appears, since the assessee was unable to produce the concerned parties and further, failed to furnish some documentary evidences like transportation bills, goods received note, etc., the Assessing Officer has treated the purchases made from the six parties as non–genuine. It is clear from the assessment order, the Assessing Officer has not doubted the sales turnover of the assessee. Thus, the issue which remains inconclusive is the source of purchase. In such situation, the entire purchases cannot be disallowed, but only the profit element embedded in such purchases can be considered for disallowance. That being the case, in our considered opinion, learned Commissioner (Appeals) was justified in restricting the addition to the profit element embedded in the alleged non–genuine purchases by estimating it @ 12.5%. Accordingly, we uphold the decision of learned Commissioner (Appeals) by dismissing the grounds raised by the Revenue.

7.

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

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