LABDHI ENTERPRISES,MUMBAI vs. ITO-WD-13(2)(2), MUMBAI

The dispute in the present appeal is confined to the addition of ` 11,86,293, on account of non–genuine purchases.

Brief facts are, the assessee is a partnership firm trading in iron and steel, hardware, tools, pipes & fittings, etc. On the basis of 2 Labdhi Enterprises information received from DGIT (Inv.), Mumbai, that the assessee has availed accommodation entries by way of bogus purchases of ` 94,90,344, the Assessing Officer re–opened the assessment for the impugned assessment year under section 147 of the Income–tax Act, 1961 (for short "the Act"). In the course of assessment proceedings, when the Assessing Officer called upon the assessee to prove the genuineness of the purchases, as observed by the Assessing Officer, the assessee expressed its inability to produce the selling parties and agreed for disallowance of 12.5% of the non–genuine purchases. Thus, ultimately, the Assessing Officer completed the assessment by making addition of 12.5% of the bogus purchases, which worked out to ` 11,86,299. The assessee unsuccessfully challenged the aforesaid addition before learned Commissioner (Appeals).

The learned Authorised Representative submitted, the assessee never agreed for the addition @ 12.5% of bogus purchases before the Assessing Officer. He submitted, the profit margin on iron and steel goods traded by the assessee is very low. Therefore, estimation of profit @ 12.5% on the alleged non–genuine purchases is high and excessive. He submitted, in assessee’s own case for assessment year 2011–12, under identical facts and circumstances, learned Commissioner (Appeals) reduced the disallowance from 12.5% to 5%.

The learned Departmental Representative relying upon the observations of the Departmental Authorities submitted that since the assessee agreed for addition @ 12.5% of the purchases, it should be upheld.

I have heard rival submissions and perused material on record. It is evident, the Assessing Officer has made addition @ 12.5% of the non–genuine purchases primarily on the ground that the assessee had agreed for such addition. The learned Commissioner (Appeals) has also sustained the addition for the very same reason. However, before me, the learned Authorised Representative has vehemently contested the aforesaid finding of the Departmental Authorities and has submitted that the assessee never made such concession. He also sought a direction to the Assessing Officer to produce the assessment records for verifying the aforesaid fact. Looking at the nature of dispute, I do not find it necessary to delve deep into the issue as to whether the assessee has agreed for addition of 12.5% of the non– genuine purchases or not. I find from the material on record, in assessee’s own case for the assessment year 2011–12, under identical facts and circumstances, the Assessing Officer had made addition of 12.5% of the non–genuine purchases. However, while deciding

In the result, appeal is partly allowed. Order pronounced in the open Court on 22.03.2019