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

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

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.

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.

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

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.

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

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