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Income Tax Appellate Tribunal, MUMBAI BENCH “J” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2012-13. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-25, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).
The grounds of appeal
filed by the assessee read as under:
1. The learned CIT(A) erred in appreciating the facts of the case and thereby confirming the assessment order dated 23rdMarch, 2015 with addition of Rs.28,30,051/- to the total income.
2. The learned CIT(A) improperly appreciated the concept of Unregistered Dealer (URD) without considering the nature of business of the appellant, and thereby supporting the addition of Rs.23,30,051/.
3. The learned CIT(A) erred on facts and in law in not appreciating that non-appearance of parties in response to summons cannot be held against the appellant for supporting the addition of Rs.28,30,051/-. 4. The learned CIT(A) erred on facts in ignoring that the appellant had produced complete reconciliation of quantity in opening balance, purchased during the year, sold during the year and closing quantity. 5. The learned CIT (A) erred on facts in not appreciating that the ease of the appellant did not rest on the fact of payment of way of cheques alone but also rested on other aspects including the aspect of reasonableness of purchase price and quantity reconciliation.
Briefly stated, the facts of the case are that the assessee is a trader of diamonds, gold and silver. During the course of re- assessment proceedings, the Assessing Officer (AO) noticed that the assessee had made purchases from the following parties: (i) Hiraben R. Patel Rs.7,32,985/- (ii) Ashadevi Dudi Rs.4,77,680/- (iii) Sachin R. Rane Rs.3,91,952/- (iv) Sushiladevi Dudi Rs.4,72,340/- Total Rs.20,74,957/- The AO vide letter dated 04.02.2015 asked the assessee to produce the details or purchases from these parties along with bills and vouchers and payment details. However, the assessee filed the bills in its own letter pad mentioning the name of the above parties and the quantity and amount paid to them. The AO being not convinced with the said details filed by the assessee, sent notice u/s 133(6) to the above parties for verification. However, the said notices sent u/s 133(6) were returned by the postal authorities as ‘unserved’. The AO further found that the assessee had claimed purchases from unrecognized parties to the tune of Rs.2,26,40,410/-. In response to a query raised by the AO, the assessee submitted that payments to the said parties were made by cheques. However, the AO was not convinced with the said explanation of the assessee and made disallowance @ 12.5% on Rs.2,26,40,410/- and it comes to Rs.28,30,051/-.
Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) agreed with the reasons given by the AO and confirmed the disallowance of Rs.28,30,051/-. 5. Before us, the Ld. counsel of the assessee filed a Paper Book (P/B) containing (i) Ledger confirmations and details in respect of the four specific parties, (ii) Ledger accounts with purchase bills of all vendors (unregistered), (iii) Proof of payment – Bank Statements and (iv) Quantitative Tally. The Ld. counsel submits that the assessee procures goods from two main sources, one from primary (wholesale) market and other from secondary market, popularly known as end-user market. The vendor of goods who are wholesaler are registered with the VAT department and hence known as Registered Dealer i.e. RD. On the other hand, assessee also purchases jewellery from the end user i.e. individual customers who are not registered with the VAT department and known as Un-registered Dealer i.e. URD. The payments to both the classes of vendors are made through account payee cheque only. The Ld. counsel submits that the AO claims to have issued summons u/s 133(6) to the parties, but the exact parties to whom the summons were served are not known. It is stated that the AO claims to have asked the assessee to produce the parties which the appellant denies. It is finally stated that the appellant had furnished to the AO the name, address and PAN of the parties from whom the material was acquired. Further, the appellant also produced quantitative records showing quantitative tally of the materials, which fact is admitted by the AO. It is stated that if the AO’s contention of additional income @ 12.5% on Rs.2,26,410/- is accepted, then the new gross profit will be Rs.59,76,654/- which is 18.64% of the sales, which is exorbitant. It is stated that the GP margin of 9.82% for the impugned assessment year is reasonable. The Ld. counsel relies on the decision in CIT v. Nikunj Eximp Enterprises (P.) Ltd. (2013) 35 taxmann.com 384 (Bom).
On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A) and submits that the appellant has made purchases from unrecognized parties to the tune of Rs.2,26,40,410/-. The notices issued by the AO u/s 133(6) were returned by the postal authorities as unserved. Thus the Ld. DR submits that the order passed by the Ld. CIT(A) be confirmed.