ITO 27(1)(5), MUMBAI vs. JITENDRA DALICHAND SHAH, MUMBAI

The dispute in the present appeal is confined to partial relief granted by learned Commissioner (Appeals) in respect of addition made on account of non–genuine purchases.

Brief facts are, the assessee is a trader in Iron and Steel through his proprietorship concern M/s. Jay Traders. For the assessment year under consideration, the assessee filed his return of income on 14th September 2010 declaring total income of ` 3,40,648. On the basis of information received from the DGIT (Inv.), Mumbai, and the Sales Tax Department, Government of Maharashtra, that purchases worth ` 1,36,99,156, claimed to have been made from 23 parties is non– genuine as they are in the nature of accommodation entries, the Assessing Officer re–opened the assessment under section 147 of the Income Tax Act, 1961 (for short "the Act"). In the course of assessment proceedings, the Assessing Officer called upon the assessee to prove the genuineness of such purchases by calling for certain documentary evidences. As alleged by the Assessing Officer, the assessee failed to furnish the required evidences. He also observed that the parties from which the assessee claimed to have purchased the goods were not available in their given address. Thus, he ultimately concluded that the purchases made by the assessee were non–genuine. Having held so, the Assessing Officer relying upon certain judicial precedents proceeded to estimate the profit element on such purchases by applying rate of 12.5% and made an addition of ` 17,12,395. The assessee challenged the aforesaid addition before the first appellate authority.

After considering the submissions of the assessee in the context of facts and material on record, learned Commissioner (Appeals) restricted the addition to 8% of the non–genuine purchases.

The learned Departmental Representative submitted, the estimation of profit @ 12.5% as was done by the Assessing Officer is reasonable, hence, should be restored. Per contra, learned Authorised Representative submitted, in assessee’s own case for the assessment year 2009–10, the Tribunal while dealing with an identical issue has restricted the addition to 8%.

Having considered rival submissions, we are of the view that there cannot be any dispute that the assessee was unable to prove the genuineness of purchases with corroborative evidences. However, the Assessing Officer himself has ultimately worked out the addition on non–genuine purchases to the profit element embedded which was estimated by him @ 12.5%. It is also observed, while deciding identical nature of dispute in assessee’s own case for the assessment year 2009–10, the Tribunal in ITA no.759/Mum./2018, dated 7th May 2018, has restricted the addition to 8% of the non–genuine purchases. Learned Commissioner (Appeals) having followed the aforesaid decision of the Tribunal while restricting the addition to 8%, we do not find any infirmity in the decision of learned Commissioner (Appeals).

In the result, appeal stands dismissed. Order pronounced in the open Court on 28.11.2019