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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI G.S. PANNU & SHRI SAKTIJIT DEY
This is an appeal by the assessee against order dated 07.10.2015 passed by the Commissioner of Income Tax (Appeals)–26, Mumbai for A.Y. 2009–10.
Briefly the facts are, the assessee, an individual, is engaged in the business of trading in iron and steel through his proprietary concern M/s. Arpit Enterprises. For the assessment year under dispute
2 Shri Amit Agarwal assessee filed his return of income on 18.09.2009 declaring total income `6,28,560/–. The return filed by the assessee was processed under section 143(1) of the Act. Subsequently, on the basis of information received from the Sales Tax Department, Government of Maharashtra that purchases shown by the assessee from certain parties are not genuine as they are hawala operators, the Assessing Officer reopened the assessment for the impugned assessment year under section 147 of the Act. During the assessment proceedings the Assessing Officer called upon the assessee to prove the genuineness of purchases made of `77,58,233/– from six parties. Though, the assessee furnished some documentary evidences to prove the genuineness of such purchase, however, the Assessing Officer was not convinced. The Assessing Officer observed, the concerned parties to whom notices under section 133(6) were issued returned back unserved. Further, when the assessee was called upon to produce the concerned parties, he failed to do so. Thus, the Assessing Officer concluded that the purchases worth ` 77,58,233/– claimed to have been made from the concerned parties were bogus and are in the nature of accommodation entries only. Therefore, treating such purchases as unexplained expenditure of the assessee he added it to the income of the assessee. Being aggrieved of such addition, assessee preferred appeal before the First Appellate Authority. Learned
3 Shri Amit Agarwal Commissioner (Appeals) after considering the submissions of the assessee, though, agreed with the Assessing Officer that the assessee was unable to prove the genuineness of purchases to the tune of ` 81,08,233/– by furnishing documentary evidences, however, he held that the entire amount representing such purchases cannot be added as the income of the assessee, but, only the profit element embedded in such purchases can be treated as assessee’s income. Accordingly, applying the gross profit rate shown by the assessee at 5.6%, learned Commissioner (Appeals) worked out the disallowance at ` 4,58,120/–.
We have heard the parties and perused the materials on record. Though, in the memorandum of appeal the assessee has raised multiple grounds including the validity of reopening of assessment under section 147 of the Act, however, at the time of hearing the only submission made by the learned A.R. is to the effect that out of the amount added towards bogus purchases, there are purchases returned back by the assessee. Therefore, the G.P. rate adopted by the Commssioner (Appeals) should be applied to net purchases. After hearing the submissions of the parties we are of the view that the issue relating to the addition made on account of bogus purchases requires to be remitted back to the file of the Assessing Officer for verifying the aforesaid claim of the assessee. Let the Assessing Officer verify assessee’s claim of purchase returns and in case he is satisfied
4 Shri Amit Agarwal with assessee’s claim, let him apply the G.P. rate of 5.6% to net purchases, alleged to be bogus. Ground no. 4 is partly allowed.
The other grounds are dismissed as not pressed.
In the result, assessee’s appeal is partly allowed for statistical purposes. Order pronounced in the open Court on 03.11.2017