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Income Tax Appellate Tribunal, “K” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI M. BALAGANESH
Date of Hearing – 11.02.2019 Date of Order – 26.04.2019
O R D E R PER SAKTIJIT DEY. J.M.
The aforesaid appeal has been filed by the assessee challenging the order dated 5th January 2016, passed by the learned Commissioner (Appeals)–32, Mumbai, pertaining to the assessment year 2006–07.
The Revenue has filed the present appeal being aggrieved with the decision of the learned Commissioner (Appeals) in deleting the addition made on account of non–genuine purchases.
2 Industrial Exports 3. Brief facts are, the assessee a partnership firm is engaged in the business of exporting stainless steel utensils. For the assessment year under dispute, the assessment was originally completed under section 143(3) r/w section 147 of the Income-tax Act, 1961 (for short "the Act") on 4th May 2009, accepting the income returned by the assessee at ` 5,51,059. Subsequently, on the basis of enquiry conducted under section 133(6) of the Act certain information came to the possession of the Assessing Officer indicating that the following purchases made by the assessee are non–genuine:–
P.K. Trading Co. ` 1,53,56,091 2. Mahavir Trading Co. ` 47,56,763 3. Mahavir Impex ` 76,53,525 4. Gallant Traders ` 49,54,275
On the basis of such information, the Assessing Officer re– opened the assessment under section 147 of the Act. During the assessment proceedings, the Assessing Officer observed that in the course of assessment proceedings for the assessment year 2007–08, it was found that the purchases made from P.K. Trading Co. could not be verified as the notice issued under section 133(6) of the Act could not be served. As regards other parties, the Assessing Officer observed that no transaction had taken place during the year under consideration. Therefore, he called upon the assessee to prove the genuineness of purchases made from P.K. Trading Co., amounting to `
3 Industrial Exports 1,53,42,868 by producing the concerned party. In response, assessee made submissions claiming that the purchases made from the concerned party is genuine. However, since the assessee could not produce the concerned party, the Assessing Officer treated the purchases made from P.K. Trading Co. non–genuine and added back to the income of the assessee under section 69C of the Act. The assessee challenged the aforesaid addition before the first appellate authority.
After considering the submissions of the assessee, learned Commissioner (Appeals) found that in the course of assessment proceedings, the assessee had furnished the stock register including quantitative details to demonstrate that the goods purchased from P.K. Trading Co. have been exported and the assessee has also claimed duty drawback of ` 15.57 lakh on such exports. He further found that in assessee’s own case for assessment year 2007–08, similar disallowance made by the Assessing Officer in respect of purchases made from another party was deleted by the Tribunal on the reasoning that when the export sales are accepted, the purchase cannot be disbelieved. Accordingly, he deleted the addition made by the Assessing Officer.
The learned Departmental Representative submitted, learned Commissioner (Appeals) should not have deleted the addition made by the Assessing Officer simply relying upon the decision of the Tribunal
4 Industrial Exports as the party from which the assessee has purchased goods in the impugned assessment year is different. Further, he submitted, purchases made have not been proved by the assessee through proper documentary evidences. Therefore, he submitted, the issue may be restored back to the Assessing Officer to verify assessee’s claim.
The learned Authorised Representative submitted, under similar facts and circumstances the Tribunal has deleted the addition made on account of non–genuine purchases in assessment year 2007–08 in assessee’s own case. He submitted, in the impugned assessment year also the assessee had furnished all evidences to prove the genuineness of purchases made and export sales effected. He submitted, quantitative tally along with the stock register was furnished before the Assessing Officer to co–relate the purchases and sales. Therefore, he submitted, the addition made was rightly deleted by the learned Commissioner (Appeals).
We have considered rival submissions and perused material on record. It is evident, the Assessing Officer has disbelieved the purchases made from P.K. Trading Co. as non–genuine because the notice issued under section 133(6) of the Act to verify such purchases returned back unserved. Further, the assessee also failed to produce either the concerned party or any other clinching evidence to prove that purchases were made from P.K. Trading Co. Though, it may be a 5 Industrial Exports fact that the assessee was able to co–relate the quantum of purchases with the export sales through stock register and quantitative details, however, it only goes to prove that the assessee had purchased the goods from some source. But, that does not prove that the assessee had purchased the goods from P.K. Trading Co. More so, when the purchases from the said source remained un–verified due to unavailability of the said party in the given address. Therefore, the claim of the assessee that the goods were purchased from P.K. Trading Co. is unacceptable. In these circumstances, the only logical conclusion would be, the assessee must have purchased the goods from undeclared sources, possibly grey market, and attempted to regularize them by obtaining accommodation bills from P.K. Trading Co. That being the case, to some extent, there is possibility of suppression of true profit by the assessee. Learned Commissioner (Appeals) simply relying upon the decision of the Tribunal in assessment year 2007–08 and the fact that export sales made by the assessee have been proved, has deleted the addition.
In our view, the issue whether a particular purchase is genuine or not is a purely factual issue and has to be decided on the basis of facts involved in each assessment year. Therefore, the decision of the Tribunal in assessee’s own case for another assessment year, where the dispute related to purchase made from some other party, cannot
6 Industrial Exports be considered as precedent for treating the purchase made in the impugned assessment year to be genuine. In our considered opinion, the burden to prove the genuineness of purchases made from the declared source lies entirely upon the assessee. That being the case, we are inclined to restore the matter to the Assessing Officer for de novo adjudication. The assessee must furnish cogent documentary evidences to prove the genuineness of purchases made from the P.K. Trading Co. We may further add, in case the assessee fails to prove the genuineness of purchases made from the declared source, the entire purchases cannot be added to the income of the assessee, but, only the profit element embedded therein, estimated at a reasonable rate, may be considered for addition. This is due to the reason that sales effected by the assessee have been accepted. With the above observations, the issue is restored to the file of the Assessing Officer. Needless to mention, the Assessing Officer must afford reasonable opportunity of being heard to the assessee before deciding the issue. Ground raised is allowed for statistical purposes.
In the result, appeal is allowed for statistical purposes. Order pronounced in the open Court on 26.04.2019