ITO 33 (2)(5), MUMBAI vs. PRANAV MADHUSUDAN SHAH, MUMBAI

Brief facts are, the assessee, an individual, is engaged in the business of manufacturing, supply, trading of spare parts, components, machine parts, as per order received. For the assessment year under dispute, the assessee filed its return of income on 11th September 2010 declaring total income of ` 4,31,538. 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 and Investigation Wing of the Income Tax Department, the Assessing Officer found that the purchases worth ` 12,07,153, claimed to have been made by the assessee from Jindutt Corporation, to be non–genuine as the concerned party is only an accommodation entry provider. Accordingly, 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 the purchases. Further, to ascertain the genuineness of purchases, the Assessing Officer conducted independent enquiry by issuing notice under section 133(6) of the Act. However, no information was received in response to such notice. Further, the Assessing Officer observed that the assessee could only furnish ledger account, copy of purchase invoice, sale invoice, details of payments made through cheque. However, neither the assessee could furnish

In an ex–parte order passed while disposing off the appeal, learned Commissioner (Appeals) restricted the addition to 12.5% of the non–genuine purchases.

When the appeal was called for hearing, no one appeared on behalf of the assessee. As seen from record, notice of hearing issued per registered post has also returned back un–served. In the aforesaid view of the matter, we proceed to dispose off the appeal ex–parte qua the assessee after hearing the learned Departmental Representative and on the basis of material on record.

The learned Departmental Representative submitted, the assessee being a manufacturer, disallowance @ 25% of the non– genuine purchases is reasonable.

We have heard the learned Departmental Representative and perused the material on record. No doubt, the assessee has failed to conclusively prove the genuineness of purchases made. However, consumption of raw material or sales effected by the assessee have not been doubted or disputed. In such circumstances, the profit element embedded in such non–genuine purchases can be considered for addition. In fact, the Assessing Officer has adopted the very same approach by estimating the profit element on non–genuine purchases @ 25%. While deciding assessee’s appeal on the issue, learned Commissioner (Appeals) has restricted the addition to 12.5% of the non–genuine purchases. Considering the overall facts and circumstances, we are of the view that disallowance @ 12.5%, as has been made by the learned Commissioner (Appeals), is reasonable, hence, requires no interference. Grounds are dismissed.

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