M/S.LORDS SHOES BANDRA,MUMBAI vs. INCOME TAX OFFICER-19(3)(2) NOW ACIT-23(2), MUMBAI

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ITA 1189/MUM/2018Status: DisposedITAT Mumbai19 September 2018AY 2010-115 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the purchases were not genuine. However, since the sales were not disputed, the addition should be restricted to the profit element embedded in the unproved purchases.

What were the facts?

The assessee, a footwear trading firm, made purchases from a party identified as a hawala operator. Despite notices and summons, the assessee failed to produce the seller or any supporting evidence for these purchases.

What were the issues?

The primary issue was the genuineness of purchases made from a party identified as a hawala operator and the consequent addition to income.

Which sections of the Income-tax Act were involved?

Section 133(6),Section 131

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY

For Respondent: Shri S.K. Bepari

Aforesaid appeal has been filed by the assessee challenging the order dated 20th November 2017, passed by the learned Commissioner (Appeals)–33, Mumbai, for the assessment year 2010–11.

2.

The only dispute in the present appeal is in relation to the addition of ` 3,96,364, on account of bogus purchases.

3.

When the appeal was called for hearing, none was present on behalf of the assessee. It is seen from record, notice of hearing issued per registered post, though, served on the assessee, however, the assessee has not appeared. Thus, it appears, the assessee is not 2 M/s. Lords Shoes Bandra interested in pursuing the appeal. That being the case, I proceed to dispose off the appeal ex–parte qua the assessee after hearing the learned Departmental Representative.

4.

Brief facts are, the assessee a partnership firm is engaged in the business of trading in foot ware and allied product. For the assessment year under dispute, the assessee filed its return of income on 30th September 2010, declaring income of ` 15,15,505. During the assessment proceedings, the Assessing Officer on the basis of information received from Sales Tax Department, Maharashtra Government, found that purchases made by the assessee from M/s. Deep Enterprises, is not genuine since the said party has been identified as a hawala operator providing accommodation bills. To examine the genuineness of the purchases made, the assessee issued notice under section 133(6) of the Income Tax Act, 1961 (for short “the Act”) to M/s. Deep Enterprises, however, the said notice returned unserved to the postal remark “left at address”. Though, the Assessing Officer called upon the assessee to produce the concerned party before him, however, the assessee failed to produce the said party. Further, to verify the authenticity of the purchase made from M/s. Deep Enterprises, the Assessing Officer summoned one of the partners of the assessee firm and examined him on oath. As observed by the Assessing Officer, the said partner of the assessee firm though stated that the purchases were made by the firm, however, he also admitted

3 M/s. Lords Shoes Bandra that neither he can produce the concerned party nor any other supporting evidence to prove the genuineness of the purchases. On the basis of the material available on the record, the Assessing Officer ultimately held that purchase of ` 3,96,364, made from M/s. Deep Enterprises, are non–genuine, accordingly, added back to the income of the assessee.

5.

Though, the assessee challenged the aforesaid addition before the learned Commissioner (Appeals), however, the learned Commissioner (Appeals) also sustained the addition made by the Assessing Officer.

6.

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

7.

I have considered submissions of the learned Departmental Representative and perused material on record. It is evident, during the assessment proceedings, on the basis of information received from the Sales Tax Department, Government of Maharashtra, the Assessing Officer wanted to verify the genuineness of purchase made from M/s. Deep Enterprises. Though, the Assessing Officer issued notice under section 133(6) of the Act to the concerned parties, seeking certain information, the said notice was returned back unserved due to unavailability of the said party in the given address. Even the assessee

4 M/s. Lords Shoes Bandra was unable to produce the concerned party or confirmation before the Assessing Officer in support of the purchase made. In fact, in a statement recorded under section 131 of the Act during the assessment proceedings, one of the partners of the assessee categorically stated that he cannot produce either the seller or any other supporting evidence to prove the purchases. In such circumstances, the source of purchase made by the assessee remained unproved. However, it is a fact on record that the Assessing Officer has not disputed the sales effected by the assessee. That being the case, the presumption would be, the assessee has purchased the goods from grey market. In these circumstances, the proper course is to add the profit element embedded in the unproved purchases. Thus, in view of the aforesaid, I direct the Assessing Officer to sustain addition @ 12.5% of the bogus purchases of ` 3,96,364. Grounds raised are partly allowed.

8.

In the result, assessee’s appeal is partly allowed. Order pronounced in the open Court on 19.09.2018

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