ITO-17(1)(1), MUMBAI vs. AKHIL STEEL, MUMBAI

This appeal by the Revenue is against the order dated 10th October 2018, passed by the learned Commissioner of Income Tax (Appeals)–55, Mumbai, pertaining to the assessment year 2009–10.

2 Akhil Steel 3. Brief facts are, the assessee, a partnership firm, is engaged in the business of trading in iron and steel. For the assessment year under dispute, the assessee filed its return of income on 31st August 2009, declaring total income of ` 2,25,858. 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 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 purchases worth ` 1,42,13,041, claimed to have been made from thirteen parties through proper documentary evidence. In response to the query raised, the assessee furnished bank statement evidencing payment made to the parties, ledger account copies, purchase invoice, corresponding sales invoice etc. The Assessing Officer, however, was not convinced with the evidences furnished by the assessee. He observed, the assessee failed to furnish stock register, delivery challan, lorry receipt, octroi payment, confirmation from transporter, etc. Further, he observed, enquiry made by him through inspector also revealed that the parties were not existing in the given address. Thus, he concluded that subject

3 Akhil Steel purchases claimed to have been made are non–genuine. However, he observed that against such purchases the assessee has effected sales. Thus, he was of the view that the assessee has purchased the goods from unknown sources and regularised such purchases by availing accommodation bills. Accordingly, he proceeded to add the profit element embedded in such purchases by estimating it @ 12.5% and made addition of ` 17,76,630. The assessee challenged the aforesaid addition before the first appellate authority.

4 Akhil Steel conclusively to the satisfaction of the Assessing Officer by furnishing certain evidences called for, such as, delivery challan, lorry receipt, octroi payment, etc. However, the Assessing Officer has accepted the fact that against the disputed purchases the assessee has effected sales and corresponding sale bills have been furnished before him. For the aforesaid reasons, the Assessing Officer has added the profit element embedded in the disputed purchases instead of adding the entire purchases. The dispute in the present appeal is basically confined to the rate of profit involved in the disputed purchases. While the Assessing Officer has estimated the profit rate @ 12.5%, learned Commissioner (Appeals) has reduced it to 8%. After considering the nature of business carried on by the assessee and other relevant factors, we are of the considered opinion that the estimation of profit @ 8% on the non–genuine purchases, as has been done by the learned Commissioner (Appeals), is fair and reasonable, hence, requires to be upheld. Accordingly, we do so. Grounds are dismissed.