INCOME TAX OFFICER 31(3)(3), MUMBAI vs. SHRI SATISH GUNWANT MANJREKAR, MUMBAI

Revenue has raised the following ground in its appeal: - 01. "On the facts and circumstances of the case the Ld. CIT(A) has erred in restricting the 32% addition of Rs. 5,81,444/- made by the AO on account of bogus purchases to 12.5%, without considering the decision of Supreme Court in the case of N.K. Proteins Ltd., wherein the apex court has confirmed the High Court's decision of (A.Y: 2010-11) Shri Satish Gunwant Manjrekar upholding the 100% addition made by the AO on account of Bogus purchases.”

Briefly stated the facts are that, the assessee an individual engaged in the business of manufacturing and trading of Batteries, UPS, Invertors and allied items, filed his return of income for the A.Y.2010-11 on 28.09.2011 declaring income of ₹.5,08,708/- and the return was processed u/s. 143(1) of the Act. Subsequently, Assessing Officer received information from the Sales Tax Department, Mumbai and DGIT(Inv.), Mumbai about the accommodation entries provided by various dealers and assessee was also one of the beneficiary from those dealers. The assessment was reopened U/s. 147 of the Act based on the information received from Sales Tax Department, Mumbai and DGIT(Inv.), Mumbai, that the assessee has availed accommodation entries from various dealers who are said to be providing accommodation entries without there being transportation of any goods. In the re-assessment proceedings, the assessee was required to prove the genuineness of the purchases made from the parties which are referred to in the Assessment Order. In response assessee vide letter dated 30.12.2015 submitted that addition cannot be made on the basis of assumption and presumptions and hence no disallowance should be made on mere suspicion that the parties are bogus. Assessee submitted that the purchases made from the parties are genuine.

Inspite of issue of notice none appeared on behalf of the assessee nor any adjournment was sought by the assessee. Therefore, we proceed to dispose off this appeal on hearing the Ld. DR on merits.

Ld. DR vehemently supported the order of the Assessing Officer.

Heard Ld. DR on merits and perused the orders of the authorities below. On a perusal of the order of the Ld.CIT(A), we find that the Ld.CIT(A) considered this aspect of the matter elaborately with reference to the submissions of the assessee and the averments in the Assessment Order and following the decision of Hon'ble Gujarat High Court in the case of the CIT v. Simit P. Sheth [356 ITR 451] restricted the disallowance to (A.Y: 2010-11) Shri Satish Gunwant Manjrekar 12.5% of the non-genuine purchases, while holding so, the Ld.CIT(A) observed as under: - “8.13 In the present case, the adverse evidence and material, relied upon in the order, to reach the finality, were disclosed to the assessee. However, the appellant could not establish the genuineness of the transaction either on the basis evidence in support of delivery of goods, or by producing the parties from whom the purchase were made. Hence the purchase transaction cannot be considered as genuine. 8.14. Nonetheless, the appellant is maintaining quantitative details of stock which is placed on record along with the tax audit report. The book results of the appellant have been found to be in conformity with that of the previous years, establishing that the purchase of goods under consideration are consumed in the course of the business and the corresponding sales stood recorded, which has not been rejected by the AO. From the facts recorded above in this case, it has emerged that the material in question was really received because without receiving such material the corresponding sales would not have been possible. However, the material was not received from the parties from whom it is shown to have been purchased as there is no independent third party evidence on record which can support the transaction. Thus, an inference can be drawn that such material were purchased from different sources which were exclusively within the knowledge of appellant and none else. It is well known that if purchases are made from open market without insisting from the genuine bills, the suppliers may be willing to sell those products at a much lower rate as compared to the rate at which they may charge in case the dealer has to give a genuine sale invoice in respect of that sale and supply the goods. There may be various factors due to which there is bound to be a substantial difference between the purchase price of unaccounted material and rate of purchase of accounted for goods. There may be a saving on account of sales-tax and other taxes and duties which may be leviable in respect of manufacture of sale of goods in question. The suppliers or the manufacturers make a substantial saving in the income-tax in respect of income from sale of unaccounted goods produced and sold by them. This may also be one of the factors due to which the seller may be willing to charge lower rates for unaccounted goods as compared to accounted for goods.

In the result, appeal of the Revenue is dismissed.