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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI MANOJ KUMAR AGGARWAL
PER SAKTIJIT DEY, J.M.
Captioned appeals by the Revenue are against the common order dated 4th July 2018, passed by the learned Commissioner of Income Tax (Appeals)–3, Nashik (Camp Office – Thane), pertaining to the assessment years 2009–10, 2010–11 and 2011–12.
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The only common issue in dispute in these appeals is in relation to partial relief granted by learned Commissioner (Appeals) in the matter of addition made on account of non–genuine purchases.
Brief facts, which are more or less common in all these appeals, except, the quantum of non–genuine purchases and addition made in this regard are as under:–
The assessee, an individual, is engaged in the business of trading in iron and steel. For the assessment years under consideration, the assessee filed his return of income in regular course and the returns of income filed by the assessee were initially processed under section 143(1) of the Income-tax Act, 1961 (for short "the Act"). Subsequently, on the basis of information received from the DGIT (Inv.), Pune, as well as Sales Tax Department, Government of Maharashtra, the Assessing Officer having found that the assessee is a beneficiary of accommodation bills issued by certain parties identified has hawala operators by the Sales Tax Department, re–opened the assessments under section 147 of the Act. In the course of assessment proceedings, the Assessing Officer called upon the assessee to establish the genuineness of the purchases through supporting evidence. Further, to ascertain the genuineness of such purchases, the Assessing Officer conducted independent enquiry by issuing notices
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under section 133(6) of the Act. As alleged by the Assessing Officer, neither the assessee was unable to prove the genuineness of purchases conclusively nor the notices issued under section 133(6) of the Act could elicit any information as they returned back un–served by the postal authority. Thus, ultimately, the Assessing Officer rejected the Books of Account under section 145(3) of the Act and treating the purchases made to be non–genuine held them as unexplained expenditure under section 69C of the Act and added back to the income of the assessee in respective assessment years. The additions made in different assessment years are as under:–
A.Y. 2009–10 ` 15,90,401 A.Y. 2010–11 ` 1,64,970 A.Y. 2011–12 ` 96,751
Challenging the aforesaid additions, the assessee preferred appeals before the first appellate authority.
After considering the submissions of the assessee in the context of facts and material on record as well as case laws cited before him, learned Commissioner (Appeals) restricted the addition to 12.5% of the non–genuine purchases in each assessment year.
When the appeal was called for hearing, no one was present on behalf of the assessee to represent the case. Even, the assessee has
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not filed any application seeking adjournment. In view of the aforesaid, we proceed to dispose off the appeal ex–parte qua the assessee after hearing the learned Departmental Representative and on the basis of material available on record.
The learned Departmental Representative submitted, the assessee was unable to prove either the delivery of goods at its premises or day–to–day movement of stock in the absence of any stock register maintained by him. Further, she submitted, the notices issued under section 133(6) of the Act were returned back un–served which prevented the Assessing Officer from ascertaining the genuineness of purchases. She submitted, learned Commissioner (Appeals) has also agreed with the Assessing Officer that the purchases are not genuine. That being the case, learned Commissioner (Appeals) was not justified in restricting the addition to 12.5% of the non–genuine purchases.
We have considered the submissions of learned Departmental Representative and perused the material available on record. There is no dispute to the fact that the assessee was unable to prove with conclusive evidence, the source of the disputed purchases made from certain parties. However, it is evident from the order of learned Commissioner (Appeals), during the appeal proceedings the assessee
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had furnished quantitative details of purchases and sales with sample copies of bills to establish the nexus between the purchases and corresponding sales. The aforesaid facts establish that the assessee certainly had purchased the goods, though, may not be from the declared source. This leads to the logical conclusion that the assessee might have purchased the goods from some other sources to avoid payment of Sales Tax / VAT, thereby, generating extra profit not disclosed to the Department and to regularize such purchases has obtained the accommodation bills. Thus, in such circumstances, the entire purchase cannot be treated as income of the assessee, but, the profit element embedded therein can be considered for addition. Considering the overall facts and circumstances of the present case and the nature of business carried on by the assessee, in our view, the decision of learned Commissioner (Appeals) in restricting the addition to 12.5% of the non–genuine purchases is good enough to take care of leakage of revenue on account of suppression of profit. Further, the aforesaid decision of learned Commissioner (Appeals) is also in consonance with the view expressed by the higher judicial authorities including the Tribunal in similar nature of cases. Insofar as the decision of the Hon'ble Supreme Court in N.K. Proteins v/s DCIT, in Special Leave to Appeal C.C. no.769/2017, we fully agree with the learned Commissioner (Appeals) that the factual context in which the
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said decision was rendered is completely different from the facts of the present case, hence, is not applicable. Accordingly, we uphold the decision of learned Commissioner (Appeals) on the issue by dismissing the ground raised.
In the result, all the appeals are dismissed. Order pronounced in the open Court on 25.10.2019
Sd/- Sd/- MANOJ KUMAR AGGARWAL SAKTIJIT DEY ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 25.10.2019 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary
Assistant Registrar ITAT, Mumbai