ITO 19(2)(5), MUMBAI vs. PRATAPRAM G CHOUDHARY, MUMBAI

Briefly the facts are, the assessee an individual is engaged in the business of trading in ferrous and non-ferrous metals through his proprietary concern M/s.

Godavari Metal Ltd. For the assessment year under dispute, the assessee filed his return of income on 13.09.2010 declaring total income of Rs.5,22,580/-. The return of income filed by the assessee was processed u/s. 143(1) of the Act. Subsequently, on the basis of the information received from the DGIT, Investigation that as communicated by the Sales Tax Department, the assessee during the year has purchased goods worth of Rs.3,87,68,532/- from nine parties who are identified as hawala operators and accommodation entry providers, the Assessing Officer reopened the assessment u/s. 147 of the Act. During the assessment proceeding, the Assessing Officer called upon the assessee to furnish documentary evidences to prove the genuineness of the purchases. As observed by the Assessing Officer, the assessee failed to produce accounts and stock register. Further, from the details furnished by the assessee, the purchases and sales were found to be not matching. The Assessing Officer observed that the assessee failed to produce delivery challan, lorry receipt, transportation bills etc. To verify the genuineness of the purchases, though the assessing officer issued notices u/s. 133(6) of the Act to the concerned parties, all such notices returned unserved. Thus, on the basis of the aforesaid facts, the Assessing Officer concluded that the assessee has failed to prove the genuineness of the of the corresponding goods, the Assessing Officer observed that the assessee was actually in the possession of the goods which the assessee might have purchased from grey market. Thus, on the aforesaid observation, the assessing officer added back the amount of Rs.3,87,68,532/- representing the purchases made from alleged hawala operators.

The assessee challenged the addition before the ld. CIT(A).

The ld. CIT(A) after considering the submissions of the assessee in the context of facts and materials on record, upheld the rejection of books of account of the assessee, since the assessee failed to prove the genuineness of the source of purchase.

Being aggrieved of the aforesaid decision of the ld. CIT(A), both the assessee and the Revenue are in appeal before us.

We have considered rival submissions and perused the materials available on record. As could be seen from the facts on record, the Sales Tax Authorities have identified certain dealers/entities as hawala operators as they were only providing physical delivery of goods. The assessee is found to be one of the beneficiaries of such transactions. In the course of assessment proceedings, when the assessing officer wanted to verify the genuineness of the purchases by issuing notices u/s. 133(6) of the Act, all such notices returned unserved. Even, the assessee failed to produce delivery challan, transportation bills, and confirmation of the concerned parties and also failed to produce the concerned parties to prove the source of such purchases. In the aforesaid circumstances, the claim of the assessee that he has purchased the goods from the declared sources is unacceptable. Hence, the Assessing Officer was correct in rejecting the books of accounts of the assessee. However, at the same time, it cannot be ignored that the Assessing Officer has not disputed the sales effected by the assessee and has observed that in the absence of corresponding purchases, the assessee could not have effected the sales. He has also come to a conclusion that the goods are actually in the possession of the assessee which indicates that the assessee must have purchased them from grey market.

In the aforesaid facts and circumstances, the view taken by the ld. CIT(A) that only the profit element embedded in such sales can be added as income, appears to be the most reasonable view which could be taken in the given facts and circumstances.

In the result, both the appeals are dismissed. Order pronounced in the open court on 01.06.2018 Sd/- Sd/- (N. K. Pradhan) (Saktijit Dey) लेखा सद�य / Accountant Member �या�यक सद�य / Judicial Member मुंबई Mumbai; �दनांक Dated : 01.06.2018 व.�न.स./Roshani, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. आयकर आयु�त(अपील) / The CIT(A) 3. आयकर आयु�त / CIT - concerned 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard File 6. आदेशानुसार/ BY ORDER,