MR.KANTILAL N. JAIN,MUMBAI vs. INCOME TAX OFFICER-19(2)(2), MUMBAI

The dispute in the present appeal is confined to the addition of ` 16,37,933, on account of non–genuine purchases.

Brief facts are, the assessee, an individual, is a trader in ferrous and non–ferrous metals. For the assessment year under dispute, the assessee filed return of income on 1st August 2009, declaring total income of ` 3,69,790. Initially, the return of income filed by the assessee was 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 DGIT (Inv.), Mumbai, that the assessee is a beneficiary of accommodation entries provided by certain parties identified as hawala operators, the Assessing Officer re–opened the assessment under section 147 of the Act. In the course of assessment proceedings, the Assessing Officer called upon the assessee to prove the genuineness of purchases worth ` 1,31,03,467, claimed to have been made during the year from thirteen parties. Though, the assessee furnished certain documentary evidences to prove the purchases, however, the Assessing Officer did not find them acceptable. Therefore, he ultimately concluded that the purchases claimed to have been made are non–genuine. However, following the decision of the Hon’ble Gujarat High Court in CIT v/s Sumit P. Sheth, [2013] 356 ITR 451 (Guj.), he proceeded to add the gross profit embedded in the alleged non–genuine purchase by estimating it at 12.5%. Accordingly, he made an addition of `

The learned Commissioner (Appeals), however, confirmed the addition made by the Assessing Officer.

The learned Authorised Representative submitted, the profit rate in the nature of business carried on by the assessee is generally in the range of 3% to 4%. He submitted, the assessee in the impugned assessment year has declared gross profit @ above 5%. Thus, he submitted, the gross profit already declared by the assessee should be reduced from the gross profit estimated @ 12.5%.

The learned Departmental Representative relied upon the observations of the Assessing Officer and learned Commissioner (Appeals).

We have considered rival submissions and perused the material on record. Though, the Assessing Officer has treated the purchases as non–genuine, however, ultimately, he has added only the profit element embedded in such purchases by estimating it @ 12.5%. Learned Commissioner (Appeals) has also sustained the aforesaid addition made by the Assessing Officer. After considering the submissions of the assessee, the nature of business and the profit rate

In the result, appeal is partly allowed. Order pronounced in the open Court on 04.03.2020