ITO 33 (3)(2), MUMBAI vs. TARUNA R DALAL, MUMBAI

Briefly stated the facts are that, the assessee is engaged in the business of manufacturing of Corrugated Boxes filed return of income on 29.09.2010 for the A.Y.2009-10 declaring income of ₹.8,01,992/- and the (A.Y: 2010-11) Taruna R Dalal return was processed u/s. 143(1) of the Act. Subsequently, Assessing Officer received information from the 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 DGIT(Inv.), Mumbai, which in-turn received from Sales Tax Department of State of Maharashtra that the assessee has availed accommodation entries from M/s. Arun Paper & Iron Traders who is 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 of ₹.21,57,748/- made from M/s. Arun Paper & Iron Traders. The assessee submitted that purchases made from the above party are genuine and the payments were made through cheques and furnished copies of invoice bills, ledger extracts and copy of bank statements are filed to substantiate its purchases. However, the Assessing Officer treated the purchases as non-genuine and he was of the opinion that assessee had obtained only accommodation entries without there being any transportation of materials and the assessee might have made purchases in the gray market. Therefore, Assessing Officer treated purchases of ₹.21,57,748/- as non-genuine and estimated the G.P.@ 25% of the said purchases and added to the income of the assessee. On appeal the Ld.CIT(A) considering the facts of the case and (A.Y: 2010-11) Taruna R Dalal various submissions of the assessee restricted the disallowance to 12.5% of the non-genuine purchases.

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

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 12.5% of the non-genuine purchases, while holding so, the Ld.CIT(A) observed as under: - “4. Ground No. 1 relates to the addition of Rs.5,39,437 (being 25% of the purchases of Rs.21,57,748) as non-genuine purchases from Arun Paper & Iron Traders. During the course of re-assessment proceedings, the assessee filed copies of invoice bills, ledger extracts and copy of bank account statement and submitted that the purchases were genuine. To find out genuineness, the AO issued notice u/s 133(6) to the above mentioned parties calling for the details. However, all the notices were returned un-served by the postal authorities with the remark "not known". Further, the AO has not accepted the contention of assessee by giving certain reasons mentioned in para 8 of assessment order. Considering the fact that the sales were actually made by the assessee but the purchases have not been confirmed by the parties concerned. So there is a possibility that such purchases are made from open market at lower rate and bill

On a careful perusal of the order of the Ld.CIT(A) and the reasons given therein, we do not find any good reason to disturb the findings of Ld.CIT(A). Thus we confirm the order passed by the Ld.CIT(A) in sustaining the addition/disallowance to the extent of 12.5% of the purchases. Grounds raised by the revenue are dismissed.

In the result, appeal of the Revenue is dismissed.