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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA & SHRI SAKTIJIT DEY
Aforesaid appeal by the Revenue is against order dated 10th March 2015, passed by the learned Commissioner (Appeals)–37, Mumbai, for the assessment year 2009–10.
The dispute in the present appeal is confined to the decision of the learned Commissioner (Appeals) in restricting the addition to 12.5% on the alleged bogus purchases.
2 Shri Dilip Anant Potnis
Brief facts are, the assessee an individual is a manufacturer and dealer of commercial kitchen equipment through his proprietary concern M/s. Potnis. For the assessment year under dispute, the assessee was originally assessed under section 143(3) Income Tax Act, 1961 (for short “the Act”) vide order dated 26th December 2011 on a total income ` 21,65,050. Subsequently, on the basis of information received from DGIT (Inv.), Mumbai, that purchases shown by the assessee to the tune of ` 35,54,653, from three parties are not genuine, the Assessing Officer re–opened the assessment under section 147 of the Act. During the re–assessment proceedings, the Assessing Officer on the basis of material on record noticed that the three parties from whom the assessee had shown purchases have been identified by the Sales Tax / VAT Department of Government of Maharashtra as hawala dealers and providing accommodation entries only. Therefore, he called upon the assessee to prove the genuineness of such purchases by producing Bank statement, purchase bills, stock register, quantitative details, reconciliation of purchases with corresponding sales, delivery challan, etc. Further, to verify the genuineness of the transactions, Assessing Officer issued notices under section 133(6) of the Act to the concerned parties. However, as observed by the Assessing Officer, all such notices were returned back un–served by the Postal Department. It is alleged by the Assessing
3 Shri Dilip Anant Potnis Officer that the assessee also did not produce the concerned parties nor furnished their latest address / whereabouts. The assessee simply furnished ledger copy of the selling parties in assessee’s books. The Assessing Officer observed, the assessee was unable to prove physical delivery of goods at its premises by furnishing delivery challan. Thus, ultimately, the Assessing Officer held that the purchases shown by the assessee are not verifiable, hence, cannot be treated as genuine. Thereafter, rejecting the books of account of the assessee the Assessing Officer proceeded to treat the purchases of ` 35,54,653, as unexplained expenditure under section 69C of the Act and added back to the income of the assessee. Being aggrieved of such addition, the assessee preferred appeal before the first appellate authority.
The learned Commissioner (Appeals), after considering the submissions of the assessee in the context of facts and material on record, having found that the Assessing Officer has not doubted the sales effected by the assessee, held that in the absence of corresponding purchases the assessee could not have effected the sales. Therefore, he ultimately restricted the addition to 12.5% of the alleged bogus purchases.
When the appeal was called for hearing no one was present for the assessee. Even, there is no application filed by the assessee
4 Shri Dilip Anant Potnis seeking adjournment. However, considering the nature of dispute, we proceed to dispose of the appeal ex parte qua the assessee after hearing the learned Departmental Representative and on the basis of material on record.
The learned Departmental Representative submitted that the assessee failed to prove the purchases from the concerned parties by producing cogent documentary evidences like confirmation letters, delivery challan, etc. Therefore, the Assessing Officer was justified in disallowing the purchases. In support of such contention, he relied upon the decision of the Tribunal, Mumbai Bench, in case of Soman Sun Citi v/s JCIT, ITA no.2960/Mum./2016, dated 23th October 2017.
Having considered the submissions of the learned Departmental Representative and perused material on record, we find that in course of assessment proceedings, the assessee had produced certain documentary evidences like purchase bills, stock register, reconciliation of purchases with corresponding sales, bank statement showing payment to sellers, etc. Thus, it is not a fact that the assessee has not produced any documentary evidence to prove the purchases. As it appears, the Assessing Officer has treated the purchases as bogus being influenced by the fact that the concerned dealers have been identified as hawala operators by the Sales Tax/VAT Department.
5 Shri Dilip Anant Potnis Another reason for disallowing the purchases appears to be non– production of the concerned parties and delivery challan by the assessee. However, it is a fact on record that Assessing Officer has not disputed the sales turnover shown by the assessee. Further, he has not pointed out any defect or discrepancy either in the stock register or reconciliation of purchases with corresponding sales. Thus, the aforesaid facts may certainly lead one to conclude, though, the assessee was unable to fully establish the genuineness of the purchases from the declared source, however, it is quite possible that he might have purchased such goods from grey market by avoiding payment of Sales Tax / VAT. Therefore, in these circumstances, only the profit element embedded in such purchases can be treated as income of the assessee. Considered in the aforesaid perspective, the decision of the learned Commissioner (Appeals) in restricting the addition to 12.5%, in our view, is reasonable, as it is consistent with the view expressed by the Co–ordinate Bench in similar type of cases. Therefore, we do not find any reason to interfere with the decision of the learned Commissioner (Appeals) on this issue. As regards the decision relied upon by the learned Departmental Representative, suffice to say, on a careful perusal of the said decision, we found it to be factually distinguishable, hence, not applicable to the facts of the Shri Dilip Anant Potnis present case. In view of the aforesaid, the grounds raised are dismissed.
In the result, Revenue’s appeal is dismissed Order pronounced in the open Court on 22.06.2018