NANDINI ANUP SURVE,MUMBAI vs. INCOME TAX OFFICER WARD-3(1), THANE

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ITA 6085/MUM/2018Status: DisposedITAT Mumbai18 September 2019AY 2009-106 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the assessee failed to conclusively prove the genuineness of purchases. However, since quantitative details of consumption and sales were provided, the entire purchase amount could not be disallowed. A reasonable profit element embedded in such purchases was to be considered for addition.

What were the facts?

The assessee claimed purchases of ₹11,66,082 from three parties. The Assessing Officer re-opened the assessment as these purchases were suspected to be accommodation bills. Despite attempts to verify, the parties could not be located, and the assessee failed to provide sufficient corroborating evidence beyond basic financial statements.

What were the issues?

Whether purchases claimed by the assessee are genuine, and if not, what is the appropriate method of addition to income.

Which sections of the Income-tax Act were involved?

Section 147,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY

For Appellant: Shri Rajesh Athavale
For Respondent: Shri Chaudhary Arunkumar Singh

Captioned appeal by the assessee is against the order dated 4th June 2018, passed by the learned Commissioner of Income Tax (Appeals)–2, Pune, for the assessment year 2009–10.

2.

Ground no.1.2, is not pressed, hence dismissed.

3.

Ground no.1.7, being general in nature does not require adjudication.

2 Nandani Anup Surve

4.

The rest of the grounds are on the issue of addition of ` 11,66,082, made on account of non–genuine purchases.

5.

Brief facts are, the assessee, an individual, is engaged in the business of manufacturing engineering goods through her proprietary concern M/s. M.K. Enterprises. For the assessment year under dispute, the assessee filed her return of income on 20th September 2009, declaring income of ` 4,92,510. The return of income filed by the assessee was 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 Sales Tax Department, Government of Maharashtra that purchases worth ` 11,66,082, claimed to have been made by the assessee from three parties are not genuine, as they are in the nature of accommodation bills, the Assessing Officer re–opened the assessment under section 147 of the Act. In the course of assessment proceedings, the Assessing Officer called upon the assessee to prove the genuineness of purchases made by furnishing corroborating evidences. Further, to verify the genuineness of such purchases, the Assessing Officer conducted independent enquiry by issuing notices under section 133(6) of the Act to the concerned parties. However, as alleged by the Assessing Officer, all such notices returned back un–served by the postal authority. Further, attempt

3 Nandani Anup Surve made by the Assessing Officer to ascertain the whereabouts of the concerned parties through Ward Inspector also proved futile. It is observed by the Assessing Officer that except furnishing the Profit & Loss Account, Balance Sheet, party wise details of purchase and sale, details of sundry creditors / debtors, copy of VAT and CST return, the assessee failed to furnish any other corroborative evidence, such as, stock register, transportation document, delivery challan, etc. to prove the genuineness of purchases. Accordingly, he treated the purchases of ` 11,66,082, as non–genuine and added back to the income of the assessee. The aforesaid addition made by the Assessing Officer was also sustained by learned first appellate authority.

6.

The learned Authorised Representative submitted, in the course of assessment proceedings, the assessee had furnished purchase bills, payment details, quantitative tally of purchases, consumption and sales with party wise details. He submitted, the Assessing Officer has not disputed the consumption of raw materials and sale of finished products. In such circumstances, disallowance of entire purchases is improper. He submitted, at the best the profit element embedded in such purchases can be considered for addition.

4 Nandani Anup Surve

7.

The learned Departmental Representative strongly relied upon the observations of the Assessing Officer and learned Commissioner (Appeals).

8.

I have considered rival submissions and perused material on record. The facts on record reveal that before the Departmental Authorities, the assessee has not been able to conclusively prove genuineness of purchases. Even, attempt made by the Assessing Officer to independently verify the purchases bore no result. In such circumstances, assessee’s claim of purchases made being genuine cannot be accepted. However, the fact that the assessee had furnished quantitative details relating to purchase, consumption and sale of goods cannot be completely overlooked. Thus, a reasonable presumption can be drawn that the assessee may not have purchased the goods from the declared source but has purchased them from third parties and for regularizing such purchases has obtained accommodation bills. In such circumstances, the entire purchases made by the assessee cannot be disallowed and added back to the income of the assessee. Rather, it would be reasonable to estimate the profit element embedded in such purchases and consider it for addition. In the peculiar facts and circumstances of the case, I am of the view that addition @ 12.5% of the non–genuine purchases would

5 Nandani Anup Surve be reasonable. Accordingly, I direct the Assessing Officer to restrict the addition to 12.5% of ` 11,66,082.

9.

In the result, assessee’s appeal is partly allowed. Order pronounced in the open Court on 20.09.2019

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