TARLIKA K SHAH,MUMBAI vs. INCOME TAX OFFICER 31(3)(2), MUMBAI

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ITA 5556/MUM/2018Status: DisposedITAT Mumbai13 March 2020AY 2010-115 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that since the Assessing Officer did not dispute the sales made by the assessee, it was unjustified not to apply a profit rate to the disputed purchases. Therefore, the Tribunal directed the Assessing Officer to disallow 12.5% of the disputed purchases.

What were the facts?

The assessee claimed purchases amounting to ₹5,22,057 from two parties, which were disallowed by the Assessing Officer due to lack of proof of payment and non-service of notices to the sellers. The CIT(A) upheld this disallowance.

What were the issues?

Whether the entire disallowance of purchases was justified when sales were not disputed, and if a profit element should be estimated instead of a full disallowance.

Which sections of the Income-tax Act were involved?

Section 147,Section 133(6),Section 145(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC”BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY

For Respondent: Ms. R. Kavitha

This appeal has been filed by the assessee against the order dated 20th June 2018, passed by the learned Commissioner of Income Tax (Appeals)–42, Mumbai, for the assessment year 2010–11.

2.

The dispute in the present appeal is confined to the disallowance of ` 5,22,057, made on account of non–genuine purchases.

3.

When the appeal was called for hearing none appeared on behalf of the assessee despite issuance of notice. There is no application seeking adjournment either.It is also noticed that on earlier occasion

2 Tarlika K. Shah also, no one appeared on behalf of the assessee. Thus, from the aforesaid facts, it is clear that the assessee is neither diligent nor interested in pursuing the present appeal. Accordingly, I proceed to dispose off the appeal ex–parte, qua the assessee after hearing the learned Departmental Representative and on the basis of material available on record.

4.

Brief facts are, the assessee, an individual, is engaged in the business of trading in building material. For the assessment year under consideration, the assessee filed her return of income on 24th September 2010, declaring total income of ` 2,72,120. Initially, the return of income filed by the assessee was processed under section 143(1) of the Income Tax Act, 1961 (for short "the Act"). Subsequently, on the basis of information received from the Sales Tax Department, Government of Maharashtra, through the office of the DGIT (Inv.), Mumbai, that the assessee is a beneficiary of accommodation entries provided by certain entities identified as a hawala operators by the Sales Tax Department, the Assessing Officer re–opened the assessment under section 147 of the Act. In the course of the assessment proceedings, the Assessing Officer called upon the assessee to prove genuineness of purchases amounting to ` 13,31,855 claimed to have been made during the year from five entities. Further, to independently verify the genuineness of purchases, the Assessing

3 Tarlika K. Shah Officer issued notices under section 133(6) of the Act to the selling dealers. However, as alleged by the Assessing Officer, all such notices returned back un–served due to unavailability of the entities in the given address. Further, on verifying the evidences furnished by the assessee, the Assessing Officer was not convinced regarding the genuineness of the purchases claimed to have been made. The Assessing Officer observed, the assessee failed to furnish not only whereabout of the parties, but also failed to produce them. Further, delivery challan, lorry receipt, octroi receipt, transportation details, etc., were not furnished to prove physical delivery of goods. Accordingly, holding that the purchases are not verifiable, the Assessing Officer rejected the books of account under section 145(3) of the Act. Though, he held that the purchases are non genuine, however, he observed that in respect of purchases worth ` 8,09,798, the assessee was able to produce bank statement reflecting the payments made towards purchases. Thus, he was of the view that the assessee might have purchased the goods from some other sources and accordingly estimated the profit @ 12.5% of such purchases. However, in respect of the balance amount of ` 5,22,057 representing purchases made from two parties, the Assessing Officer disallowed the entire amount on the reasoning that the assessee was not able to show that the payments have been made for the purchases. Accordingly, he completed the assessment. Though, the assessee

4 Tarlika K. Shah contested the addition made by the Assessing Officer, however, learned Commissioner (Appeals) upheld the disallowance.

5.

I have considered the submissions of learned Departmental Representative and perused the material on record. As could be seen from the grounds raised, the assessee has only disputed the addition of ` 5,22,057. It has been urged in the ground that like the estimation of profit in respect of other purchases, the Assessing Officer should have applied the profit rate of 12.5% in respect of purchases made from the other two parties. Having gone through the assessment order as well as the order of learned Commissioner (Appeals), I find that the only reason the Assessing Officer did not apply the profit rate @ 12.5% to the purchases of ` 5,22,057, made from two parties is, the assessee was unable to furnish the Bank statement reflecting the payments made towards the purchases. However, it is a fact on record that the Assessing Officer has not disputed the sales effected by the assessee. That being the case, I do not find any justification in not applying the profit rate of 12.5% in respect of the purchases of ` 5,22,057, as was done in case of balance purchases. Accordingly, I direct the Assessing Officer to disallow 12.5% out of the purchases of ` 5,22,057. Grounds raised by the assessee are allowed to the extent indicated above.

5 Tarlika K. Shah

6.

In the result, appeal is partly allowed. Order pronounced in the open Court on 13.03.2020

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