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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY
Aforesaid appeals have been filed by the assessee challenging common order dated 4th December 2017, passed by the learned
2 Shri Bhavin Vinod Shah Commissioner (Appeals)–28, Mumbai, for the assessments years 2010–11 and 2011–12.
At the outset, the learned Authorised Representative expressed his intention not to press grounds no.1 and 2, and only contest the issue on merit. Accordingly, grounds no.1 and 2 are dismissed.
The only common issue on merits arising in both the appeals relate to addition made on account of non–genuine purchases.
Brief facts, which are more or less common for both the assessment year in dispute are, the assessee, an individual, is engaged in the business of retail and semi–wholesale trading of nuts, bolts and other hardware items through his proprietary concerns M/s. Shree Fasteners. For the assessment year 2010–11, the assessee filed his return of income on 13th October 2010, declaring total income of ` 3,26,820. Similarly, for the assessment year 2011–12, the assessee filed his return of income on 30th September 2011, declaring total income of ` 3,40,705. The return of income filed for the aforesaid assessment years were initially processed under section 143(1) of the Income Tax Act, 1961 (for short “the Act”). Subsequently, on the basis of information received from DGIT (Inv.), Mumbai, as well as the Sales Tax Department, that purchases made of ` 38,59,841, from 12 parties in assessment year 2010–11 and purchaes worth ` 26,59,760 from 12
3 Shri Bhavin Vinod Shah parties in assessment year 2011–12 were not genuine, the Assessing Officer re–opened the assessment under section 147 of the Act. During the assessment proceedings, the Assessing Officer called upon the assessee to produce documentary evidences to establish genuineness of purchases. However, as observed by the Assessing Officer, the assessee failed to furnish stock register, journal, delivery challan, lorry receipts, octroi payment, quantitative tally, confirmation from transport operator, etc. to prove the genuineness of purchases. Further, he observed that notices issued to the concerned parties for obtaining information regarding the transactions with the assessee also returned back unserved. Thus, in view of the aforesaid facts, the Assessing Officer proceeded to complete the assessment to the best of his judgment under section 144 r/w 147 of the Act by treating the purchases made during the relevant previous years as non–genuine and accordingly added back the amount of ` 38,59,841 and ` 26,59,760 in assessment year 2010–11 and 2011–12 respectively.
Though, the assessee challenged the aforesaid addition made by the Assessing Officer before the learned Commissioner (Appeals), however, he was unsuccessful.
The learned Authorised Representative contesting the additions made by the Assessing Officer submitted that in course of assessment proceedings, the assessee could not appear due to unavoidable
4 Shri Bhavin Vinod Shah circumstances which resulted in completion of assessments ex–parte. He submitted, before the learned Commissioner (Appeals), though, the assessee has produced certain documentary evidences by way of additional evidences, such as, tax audit report, assessment order passed by the Sales Department showing payment of VAT, however, learned Commissioner (Appeals) has not at all considered them. The learned Authorised Representative submitted, under identical facts and circumstances, the Assessing Officer in assessee’s own case for assessment year 2009–10 has estimated the profit @ 12.5% of the alleged non–genuine purchases. He submitted, only because in the impugned assessment years the assessee was unable to appear, the Assessing Officer has made addition of the entire purchases treating them as non–genuine. The learned Authorised Representative submitted, since, the Assessing Officer has not disputed the sales effected by the assessee, only the profit element embedded in the alleged non–genuine purchases should be treated as income of the assessee and it can be estimated by applying the profit rate of 12.5% as the Assessing Officer himself has done in the assessment year 2009–10.
The learned Departmental Representative relied upon the observations of the learned Commissioner (Appeals) and the Assessing Officer.
5 Shri Bhavin Vinod Shah
I have considered rival submissions and perused materials on record. Undisputedly, due to non–appearance before the Assessing Officer assessments were completed ex–parte by making addition of the entire non–genuine purchases alleged to have been made by the assessee. However, it is a fact on record that the Assessing Officer has not disturbed the sales turnover of the assessee. That being the case, it has to be presumed that in the absence of purchases made, the assessee could not have achieved the sales turnover. Thus, doubt remains only with regard to source of purchases claimed to have been made by the assessee. It is a fact on record that the assessee has failed to prove the genuineness of purchases made from the declared source. Thus, it has to be accepted that the assessee has effected purchases from some other unknown sources and to regularise such purchases might have obtained accommodation bills from the concerned parties. In these circumstances, the entire purchases made by the assessee cannot be treated as income, except, the profit element embedded therein. It is seen from record, under identical facts and circumstances, the Assessing Officer in assessee’s own case for assessment year 2009–10 has estimated the profit @ 12.5%. Applying the same standard, I direct the Assessing Officer to restrict the addition in the impugned assessment years to 12.5% of the non– genuine purchases. Grounds raised are partly allowed.
6 Shri Bhavin Vinod Shah
In the result, assessee’s appeals are partly allowed. Order pronounced in the open Court on 19.09.2018