ITO 19 (3)(1), MUMBAI vs. RESHMIDEVI JAMANTRAJ JAIN, MUMBAI

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ITA 5666/MUM/2018Status: DisposedITAT Mumbai19 December 2019AY 2009-104 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 held that while the assessee couldn't prove the source of purchases, the sales effected by the assessee were not doubted. Therefore, only the profit element embedded in the non-genuine purchases should be added to income.

What were the facts?

The Assessing Officer reopened the assessment based on information that purchases from 11 parties were non-genuine, identifying them as hawala operators. The AO rejected the assessee's books and added the entire purchase amount to income.

What were the issues?

Whether the entire non-genuine purchases should be added to income or only the profit element embedded therein, given that the sales were not doubted.

Which sections of the Income-tax Act were involved?

Section 147,Section 144

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN

For Appellant: Ms. Ranjana Gadge
For Respondent: Smt. Jyothi Lakshmi Nayak

Income Tax Officer ……………. Appellant Ward–19(3)(1), Mumbai v/s Reshmidevi Jamantraj Jain Prop: M/s. Pravin Metal 43/45, 1st Kumbharwada ……………. Respondent 1st Pathan Street, Mumbai 400 004 PAN : ADAPJ5326R Assessee by : Ms. Ranjana Gadge Revenue by : Smt. Jyothi Lakshmi Nayak Date of Hearing – 26.11.2019 Date of Order – 19.12.2019

O R D E R PER SAKTIJIT DEY, J.M.

The aforesaid appeal by the Revenue is against the order dated 20th July 2018, passed by the learned Commissioner of Income Tax (Appeals)–30, Mumbai, pertaining to the assessment year 2009–10.

2.

The dispute in the present appeal is confined to part deletion of disallowance made by the Assessing Officer on account of non–genuine purchases.

2 Reshmidevi Jamantraj Jain

3.

Brief facts are, the assessee, an individual, is engaged in the business of trading in ferrous and non–ferrous metal. On the basis of information received from the office of the DGIT (Inv.), Mumbai, and the Sales Tax Department, Government of Maharashtra, that purchases worth ` 26,81,359, claimed to have been made by the assessee from 11 parties are non–genuine as the concerned parties have been identified as hawala operator providing accommodation bills, the Assessing Officer re–opened the assessment under section 147 of the Act. Since, the assessee did not appear before the Assessing Officer, assessment was completed under section 144 r/w section 147 of the Act to the best of judgment vide order dated 5th March 2015. While completing the assessment, the Assessing Officer held that the purchases shown by the assessee are not verifiable and accordingly rejected the books of account. Further, he added back the purchases of ` 26,81,359, to the income of the assessee. The assessee challenged the aforesaid addition before the first appellate authority.

4.

After considering the submissions of the assessee in the context of facts and material on record learned Commissioner (Appeals) restricted the addition to 12.5% of the non–genuine purchases.

5.

The learned Departmental Representative submitted, before the Assessing Officer the assessee did not furnish any evidence to prove

3 Reshmidevi Jamantraj Jain the genuineness of purchases. Therefore, the entire non–genuine purchases have to be added to the income of the assessee. In support of such submissions, she referred to the decision of the Hon'ble Supreme Court in N.K. Proteins Ltd.

6.

The learned Authorised Representative submitted, the sales effected by the assessee have never been doubted. Therefore, only profit element embedded in such purchases can be considered for addition. She submitted, the disallowance made by learned Commissioner (Appeals) @ 12.5% is on a much higher side as the gross profit rate in such line of business varies between 3% and 4%. Thus, she submitted, the decision of the learned Commissioner (Appeals) should be upheld.

7.

We have considered rival submissions and perused the material on record. Though, it may be a fact that the assessee was unable to prove the source of purchases through clinching evidence, however, there is no doubt or suspicion raised with regard to the sales effected by the assessee. Therefore, logically, in the absence of such purchases, the assessee could not have effected the sales. In such circumstances, as per the consistent view of the Tribunal and different High Courts, the profit element embedded in the non–genuine purchases has to be considered for addition. In the facts of the present case, learned Commissioner (Appeals) has estimated the profit

4 Reshmidevi Jamantraj Jain element @ 12.5% and restricted the disallowance to that extent. Considering the nature of business carried out by the assessee, in our considered opinion, the disallowance made by learned Commissioner (Appeals) is just and proper, hence, does not call for any interference from us. On careful analysis of the decision of the Hon'ble Supreme Court in N.K. Proteins, it is found to be factually distinguishable, thus, not applicable to the facts of the present case. Grounds are dismissed.

8.

In the result, appeal stands dismissed. Order pronounced in the open Court on 19.12.2019

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