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Income Tax Appellate Tribunal, “G” Bench, Mumbai
Before: Shri G. Manjunatha & Shri Ravish SoodShri Shripal Ganeshlal Jain
PER RAVISH SOOD, JM
The present appeal filed by the revenue is directed against the order passed by the CIT(A)-53, Mumbai, dated 19.11.2018, which in turn arises from the order passed by the A.O under Sec.143(3) r.w.s 147 of the Income Tax Act, 1961 (for short ‘Act’), dated 23.03.2016.
Briefly stated, the assessee who is engaged in the business of trading in metal had filed his return of income for A.Y. 2009-10 on 30.07.2009, declaring his total income at Rs.6,82,883/- . Original assessment under Sec.143(3), dated 21.11.2011 was framed on 21.11.2011, as per which the income of the assessee was assessed at Rs.7,26,930/-. Subsequently, the income of the assessee was assessed by the A.O, vide his order passed under Sec. 143(3) r.w.s 147, dated 20.03.2014 at Rs.14,77,000/-. On the basis of information gathered in the course of the survey proceedings conducted by the department in the case of Shri Dinesh Bohra, it stood
Income Tax Officer-19(3)(3) Vs. Shri Shripal Ganeshlal Jain revealed that the assessee as a beneficiary had obtained accommodation purchase bills from one of the group concern of the aforesaid person. On the basis of the aforesaid information the case of the assessee was reopened under Sec. 147 of the Act.
In the course of the assessment proceedings, it was observed by the A.O that the assessee had claimed to have made purchases from the following tainted party:
Sr. No. Name of the party Amount 1. New Steel India Rs.41,40,742/- Total Rs.41,40,742/- In order to verify the genuineness of the aforesaid purchase transaction, the A.O called upon the assessee to furnish supporting documentary evidence viz. correct and complete address of the aforesaid supplier, purchase details, invoices/bills, copies of ledger account, details of transportation of goods i.e lorry receipts, documentary evidence reflecting the relevant entries of having been received such goods at his premises, and also the fact that the same had been consumed, alongwith the details of payment made to the aforesaid party etc. Also, the assessee was directed to furnish the details as regards the corresponding sales vis-a-vis the impugned purchases made from the aforementioned party. However, the assessee failed to comply with the aforesaid direction of the A.O and did not furnish the requisite details. As the assessee failed to discharge the onus that was cast upon him to substantiate the authenticity of the purchases which were claimed to have been made from the aforementioned tainted party, therefore, the A.O not being satisfied with the correctness and completeness of the accounts of the assessee rejected his books of accounts by invoking the provisions of Sec.145(3) of the Act. Observing, that the assessee had not made any genuine purchases from the aforementioned party but had only obtained accommodation entries in order to inflate its purchases/expenses, and thereby deflate his income, the A.O disallowed the entire amount of purchases of Rs.41,40,742/- that was claimed by the assessee to have been made from the aforesaid party.
Aggrieved, the assessee assailed the assessment framed by the A.O before the CIT(A). Observing, that the sales corresponding to the aforesaid purchases had not been disputed by the A.O, the CIT(A) held a conviction that the assessee had purchased the goods not from the Income Tax Officer-19(3)(3) Vs. Shri Shripal Ganeshlal Jain aforementioned party but from the open/grey market. On the basis of his aforesaid observation, the CIT(A) restricted the addition to the extent of profit element of 12.5%, which as per him was embedded in making of such impugned purchases by the assessee from the open/grey market. Resultantly, the CIT(A) restricted the addition to an amount of Rs.5,17,600/- (i.e 12.5% of Rs.41,40,742/-).
The revenue being aggrieved with the order passed by the CIT(A) has carried the matter in appeal before us. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. Admittedly, the assessee in the course of the proceedings before the lower authorities had failed to substantiate the authenticity of the purchases which were claimed by it to have been made from the aforementioned tainted party i.e M/s New Steel India. Accordingly, the lower authorities were justified in concluding that the assessee had not made any genuine purchases from the aforementioned party. At the same time, the CIT(A) being of the view that as the corresponding sales pertaining to the impugned purchases had not been doubted by the A.O, therefore, he was of the view that it could safely be concluded that the purchases of the goods had actually been made by the assessee, though not from the aforementioned party but from the open/grey market. On the basis of his aforesaid conviction, the CIT(A) was of the view that the addition in the case of the assessee was liable to be restricted only to the extent of the profit which the assessee would have generated by procuring the goods at a discounted value from the open/grey market. Accordingly, on an estimate basis the CIT(A) had worked out the profit element in making of such impugned purchases by the assessee from the open/grey market @ 12.5% of their aggregate value. We have given a thoughtful consideration and find no infirmity in the aforesaid view so taken by the CIT(A). In our considered view, as the sales corresponding to the impugned purchases had not been doubted by the A.O, therefore, it could safely be concluded that the assessee had procured the goods under consideration not from the aforementioned party but from the open/grey market. As such, we are in agreement with the view taken by the CIT(A) that the addition in the hands of the assessee was liable to be restricted only to the extent of the profit which he would have made by procuring the goods at a discounted value from the open/grey market. We thus finding no infirmity in the view taken by the CIT(A), who had fairly estimated the aforesaid profit @ 12.5% of the value of the impugned purchases, uphold his order.
Income Tax Officer-19(3)(3) Vs. Shri Shripal Ganeshlal Jain
Resultantly, the appeal filed by the revenue is dismissed.
Order pronounced in the open court on 28.02.2020