ITO-27(2)(1), MUMBAI vs. SHRI. KIRTI HEMCHAND DHAROD, MUMBAI

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ITA 674/MUM/2019Status: DisposedITAT Mumbai13 February 2020AY 2009-104 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 Commissioner (Appeals)'s decision to reduce the disallowance to 12.5% of the non-genuine purchases. It reasoned that since the consumption of raw material and sales were not disputed, only the profit element embedded in the purchases should be disallowed.

What were the facts?

The Assessing Officer reopened the assessment based on information about accommodation bills and added back purchases claimed from six parties, deeming them non-genuine. The assessee failed to provide convincing evidence like delivery challans and transportation bills.

What were the issues?

Whether the entire purchase amount should be disallowed when the genuineness of the supplier is doubted, or only the profit element embedded in such purchases.

Which sections of the Income-tax Act were involved?

Section 147,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI G. MANJUNATHA

For Respondent: Shri Ashish Kumar

Income Tax Officer ……………. Appellant Ward–27(2)(1), Mumbai v/s Shri Kirti Hemchand Dharod Flat no.9, A–Wing, 2nd Floor Jai Bandhu CHS, 90 Feet Road ……………. Respondent Ghatkopar (E), Mumbai 400 077 PAN – AAEPD6620R Revenue by : Shri Ashish Kumar Assessee by : None Date of Hearing – 30.01.2020 Date of Order – 13.03.2020

O R D E R PER SAKTIJIT DEY. J.M.

The present appeal has been filed by the Revenue challenging the order dated 28thNovember 2018, passed by the learned Commissioner of Income Tax (Appeals)–26, Mumbai, pertaining to the assessment year 2009–10. 2. When the appeals were called for hearing no one was present on behalf of the assessee to represent the case. There is no application seeking adjournment either. Accordingly, we proceed to dispose off the 2 Shri Kirti Hemchand Dharod appeals ex–parte qua the 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 reduction of disallowance made on account of non–genuine purchases to 12.5%.

4.

Brief facts are, the assessee, an individual, is engaged in the business of manufacturing readymade garments. For the assessment year under dispute the assessee filed his return of income on 10thSeptember 2009, declaring total income of `5,19,269. The return of income filed by the assessee was initially processed under section 143(1) of 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 bills provided by certain entities identified as hawala operators, the Assessing Officer re–opened the assessment under section 147 of the Act. During the assessment proceedings, the Assessing Officer called upon the assessee to prove the genuineness of purchase worth ` 2,76,483, claimed to have been made during the year from six parties. Further, to independently verify the genuineness of such purchases, the Assessing Officer issued notices under section 133(6) of the Act to the concerned parties. As alleged by the Assessing Officer, all such notices returned back un–

3 Shri Kirti Hemchand Dharod served with the remark “left”. Further, on verification of the evidences furnished by the assessee, the Assessing Officer did not find them convincing. He observed, the assessee failed to furnish delivery challan, transportation bills, etc. to prove actual delivery of goods. Thus, ultimately, treating the purchase to be non–genuine, the Assessing Officer added back the amount of ` 2,76,483, to the income of the assessee. The assessee challenged the aforesaid addition before the first appellate authority.

5.

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

6.

We have considered the submissions of learned Departmental Representative and perused the material on record. The factors which influenced the Assessing Officer to disallow the purchases to be non– genuine are, the notices issued under section 133(6) of the Act returned back un–served, the assessee failed to furnish the delivery challan and transportation details, etc. However, a perusal of the assessment order makes it clear that the Assessing Officer has not disputed the consumption of raw material or sales effected by the assessee. In such circumstances, logical conclusion one can arrive at is, the assessee might have purchased the goods from some other sources. Therefore, in such circumstances, the entire purchase cannot

4 Shri Kirti Hemchand Dharod be disallowed, but, the profit element embedded in such purchases can be disallowed. In that view of the matter, learned Commissioner (Appeals) was justified in disallowing 12.5% of the alleged non– genuine purchases, which in our view is reasonable. Grounds raised by the Revenue are dismissed.

7.

In the result, Revenue’s appeal is dismissed. Order pronounced in the open Court on 13.03.2020

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