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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the Revenue. The relevant assessment year is 2010-11. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-1, Thane [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) r.w.s. 147 of the Income Tax Act 1961, (the ‘Act’).
Though the case was fixed for hearing on 25.11.2019, neither the assessee nor his authorized representative appeared before the Bench on the above dates. As there is non-compliance on the part of the assessee, we are Shri Ganesh Masrooji Desai proceeding to dispose off this appeal on merits, after examining the documents available on record. 2. The grounds of appeal filed by the revenue read as under :
1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in not appreciating the law correctly that once the purchases are unverifiable/not genuine/bogus, the same should have been disallowed in entirety? 2. Whether on the facts and in the circumstances of the case and in law. the Ld. CIT(A) has erred in law by not appreciating the fact that the assessee could not establish the genuineness of the purchases from the non-existent vendors? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law by not appreciating the fact that the onus to justify the claim of expenses is on the assessee and the same has failed to discharge it in relation to the purchases made from the non-existent vendors? 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law by ignoring the fact that the assessee could not substantiate its claim of purchases from non-existent vendors by means of relevant supporting documents related to movement and delivery of goods, stock register, etc. to arrive at disallowance at 25% of the purchases from the non-exigent vendors? 5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in not appreciating the law correctly that once the purchases are unverifiable/not genuine / bogus, the same should have been disallowed in entirety, particularly in view of the ratio of the decision of the Hon'ble Gujarat High Court in Tax Appeal No. 242 of 2003 dated 20/06/2016 in the case of N K. Proteins Ltd. against which the SLP was dismissed by the Hon'ble Apex Court and also decision of Hon'ble Supreme Court in case of Kanchwala Gems V/s JCIT 288 ITR 10 (SC)?
Shri Ganesh Masrooji Desai
Briefly stated, the facts of the case are that the assessee filed his return of income for the assessment year (AY) 2010-11on 22.09.2010 declaring total income of Rs.1,48,170/-. On receipt of information from the Sales Tax Department, Government of Maharashtra that the assessee had made bogus purchases from three parties amounting to Rs.6,96,565/-, the AO re-opened the assessment by issuing notice u/s 148 dated 29.04.2013. During the course of re-assessment proceedings, the assessee submitted before the AO that he is a trader in stainless steel, pipes and rods required for manufacturing companies and functions under the name and style “Ganesh Steel India”. It was further explained to the AO that the assessee maintains regular books of accounts which are subject to audit. The audited statements in Form No. 3CB and 3CD were filed before the AO. During the course of re-assessment proceedings, the AO issued notice u/s 133(6) to the said two parties calling for information. However, those notices were returned un-served by the postal authorities with the remark “not known”. On the basis of the above facts, the AO was not convinced with the above explanation of the assessee and made a disallowance of Rs.6,96,565/- u/s 69C of the Act.
Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). There was no compliance by the assessee to the notice issued by the Ld. CIT(A) during the course of appellate proceedings. Therefore, relying on the materials available on records, he decided the issue on merits. The Ld. CIT(A), relying on the decision of the Hon’ble Gujarat High Court in the case of Vijay Proteins and Sanjay Oilcake Mills estimated the disallowance @ 25% of the disputed purchases. Thus he confirmed the disallowance of Rs.1,74,141/- and deleted the balance amount of Rs.5,22,424/-.
Shri Ganesh Masrooji Desai