ITO - 27 (1)(4), MUMBAI vs. MOHD. ISMAIL SHAIKH, MUMBAI

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ITA 6312/MUM/2018Status: DisposedITAT Mumbai22 January 2020AY 2011-125 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 CIT(A)'s decision to restrict the disallowance to 12.5% of the non-genuine purchases, considering that the assessee must have procured goods from undeclared sources to effect sales.

What were the facts?

The Assessing Officer reopened the assessment based on information that the assessee obtained accommodation bills for purchases from a hawala operator. Despite the assessee providing some evidence, the AO was not satisfied and added back the entire purchase amount.

What were the issues?

Whether the entire amount of non-genuine purchases should be disallowed 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, “D” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI RAJESH KUMAR

Hearing: 09.01.2020

सुनवाई क� तार�ख / Date of Hearing 09.01.2020 घोषणा क� तार�ख /Date of Pronouncement .01.2020 आदेश / O R D E R PER SAKTIJIT DEY,JM:

1.

This is an appeal by the Revenue against order dated 16.08.2018 of learned Commissioner of Income Tax (Appeals)-25, Mumbai, for the Assessment Year 2011-12. The dispute in the appeal is confined to partial relief granted by the Ld. Commissioner of Income Tax (Appeals) in the matter of addition made on account of non-genuine purchases.

Md. Ismail Shaikh, Mumbai. - 2 - 2. Briefly the facts are, the assessee is an individual and engaged in the business of manufacturing and reselling of footwear through his proprietary concern M/s. Plus Foot. For the assessment year under dispute assessee filed his return of income on 21.09.2011 declaring total income of Rs. 5,24,177/-. Subsequently, on the basis of information received from the Sales Tax Department, Govt. of Maharashtra through the Investigation Wing of the department indicating that the assessee is a beneficiary of accommodation bills provided by Remy Sales Corporation for an amount of Rs. 4,20,000/-, which is identified as a hawala operator, the Assessing Officer reopened the assessment u/s 147 of the Income Tax Act, 1961. In course of assessment proceeding the Assessing Officer called upon the assessee to prove the genuineness of the purchase worth Rs. 4,20,000/- claimed to have been made during the year from Remy Sales Corporation by furnishing supporting evidences. In response to the query raised by the Assessing Officer, though, the assessee furnished some documentary evidences to prove the purchases, however, the Md. Ismail Shaikh, Mumbai. - 3 - Assessing Officer was not satisfied with them. As alleged by the Assessing Officer, assessee was unable to furnish any evidence to show actual delivery of goods at his premises. Further, the Assessing Officer observed, notices issued u/s 133(6) of the Income Tax Act, 1961 to the selling dealer also returned back un- served. In view of the above, the Assessing Officer concluded that the purchases worth Rs. 4,20,000/- are non-genuine. Further, he observed, to inflate his purchases and suppress the profit the assessee has availed accommodation entries. On the basis of aforesaid reasoning the Assessing Officer added back entire amount of Rs. 4,20,000/- to the income of the assessee. Assessee contested the aforesaid addition before the first appellate authority. After considering the submissions of the assessee in the context of facts and materials on record learned Commissioner (Appeals) restricted the addition to 12.5% of the non- genuine purchases.

3.

When the appeal was called for hearing no one was presented on behalf of the assessee to represent the case. Even, the assessee has not filed any Md. Ismail Shaikh, Mumbai. - 4 - application seeking adjournment. Considering the above, we proceed to dispose of the appeal ex-parte qua the assessee after hearing learned Departmental Representative and on the basis of material available on record.

4.

Heard learned Departmental Representative and perused material on record. It is evident, though, the Assessing Officer on the basis of his own reasoning has held the purchases worth of Rs. 4,20,000/- as non-genuine and has added back to the income of the assessee. However, he has not disputed the sales effected by the assessee. It is common knowledge, in absence of the purchases (raw material) the assessee could not have effected the sales. Thus, it has to be assumed that the assessee must have purchased the goods from un-declared sources and to regularize such purchases has availed accommodation bills. Considering the aforesaid aspect, learned Commissioner (Appeals) has held that in such circumstances the entire purchases cannot be disallowed but the disallowance can be restricted to the profit element embedded in such purchases.

Md. Ismail Shaikh, Mumbai. - 5 - Accordingly, he has restricted the disallowance to 12.5% of the alleged non-genuine purchases. In our view, the aforesaid decision of learned Commissioner (Appeals) is most reasonable and appropriate keeping in view the relevant facts available on record. Accordingly, the order of learned Commissioner (Appeals) on the disputed issues is upheld by dismissing the grounds raised by the Revenue.

7. In the result, the appeal filed by the Revenue is dismissed.

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