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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI MANOJ KUMAR AGGARWAL
Date of Hearing – 08.05.2019 Date of Order – 15.05.2019
O R D E R PER SAKTIJIT DEY. J.M.
The aforesaid appeals have been filed by the Revenue challenging two separate orders, both dated 5th February 2018, passed by the learned Commissioner (Appeals)–29, Mumbai, pertaining to the assessment years 2009–10 and 2010–11.
2 Chetan P. Chitalia 2. The common solitary grievance of the Revenue in the aforesaid appeals is with regard to the decision of the learned Commissioner (Appeals) in granting partial relief to the assessee in respect of the additions made by the Assessing Officer on account of non–genuine purchases.
Brief facts are, the assessee is engaged in the business of wholesale trading in iron and steel goods. On the basis of information received from the DGIT (Inv.), Mumbai, and the Sales Tax Department, Government of Maharashtra, that certain purchases made by the assessee in the aforesaid assessment years are non–genuine, the Assessing Officer re–opened the assessment under section 147 of the Income Tax Act, 1961 (for short "the Act") in both the assessment years. In the course of assessment proceedings, the Assessing Officer found that as per the information received, purchases worth ` 1,01,43,657, from two parties in the assessment year 2009–10 and `84,29,229, from one party in assessment year 2010–11 are not genuine. Therefore, he called upon the assessee to prove the genuineness of purchases through supporting evidences. Further, to verify the genuineness of purchases independently, the Assessing Officer issued notices under section 133(6) of the Act to the selling dealers which, according to the Assessing Officer, returned back unserved. Further, the Assessing Officer observed that the assessee
3 Chetan P. Chitalia could neither produced the parties nor furnish delivery challan, transport receipt, day–to–day stock register, etc., to prove the genuineness of purchases. Thus, the Assessing Officer ultimately concluded that the purchases made by the assessee amounting to ` 1,01,43,657 in assessment year 2009–10 and ` 84,29,229 assessment year 2010–11 are non genuine and accordingly added back to the income of the assessee. The assessee challenged the aforesaid additions before the first appellate authority.
After considering the submissions of the assessee, though, learned Commissioner (Appeals) agreed with the Assessing Officer that genuineness of purchases could not be proved by the assessee through supporting documentary evidences, however, he was of the view that the entire non–genuine purchases could not be disallowed and added back to the income of the assessee. Relying upon the decision of the Hon’ble Gujarat High Court in CIT v/s Simit P. Sheth, 356 ITR 451 (Guj.), learned Commissioner (Appeals) held that only the profit element embedded in the non–genuine purchases can be treated as income of the assessee. Accordingly, he estimated the profit @ 12.5% on the bogus purchase in both the assessment years and directed the Assessing Officer to restrict the additions to that extent only.
4 Chetan P. Chitalia 5. We have considered rival submissions and perused the material on record. As could be seen from the facts and material on record, the genuineness of purchases made of ` 1,01,43,657, from two parties in the assessment year 2009–10 and worth ` 84,29,229, in assessment year 2010–11 were doubted by the Assessing Officer in the course of assessment proceedings. Alleging that the assessee could not furnish any supporting evidences to prove the genuineness of purchases, the Assessing Officer added back the entire purchases to the income of the assessee. However, learned Commissioner (Appeals) restricted such addition to 12.5% of the non–genuine purchases. In our view, the decision of the learned Commissioner (Appeals) is on sound basis. It is evident, the Assessing Officer has not disputed or doubted the sales turnover declared by the assessee. Therefore, it follows that in the absence of purchases, the assessee could not have effected the sales. This leads to the logical conclusion that the assessee might have purchased the goods from some other source and has obtained accommodation bills from the selling dealers to regularize the transactions. In these circumstances, only the profit element embedded in the non–genuine purchases can be considered for addition. The estimation of profit @ 12.5% of the non–genuine purchases, as done by the learned Commissioner (Appeals), is in tune with the decision of the Tribunal involving similar nature of dispute. In 5 Chetan P. Chitalia view of the aforesaid, we decline to interfere with the decision of the learned Commissioner (Appeals) in both the assessment years under appeal. Grounds raised are dismissed.
In the result, appeals are dismissed. Order pronounced in the open Court on 15.05.2019