RISHAB IMPEX,MUMBAI vs. CIT (A) -25, MUMBAI

Brief facts, which are more or less common for both the assessment years are, the assessee a partnership firm is engaged in trading in textile. As observed by the Assessing Officer, an intimation was received from DDIT (Inv.), Unit–V(3), Mumbai, that in the course of investigation in the case of Shri Jignesh Patel Group concern, it was found that they were involved in providing accommodation entries. The controller of group companies Shri Rajendra Bhimrajka in a statement recorded under section 131 stated that assessee had availed accommodation bills from Shri Jignesh Patel Group concerns. On the basis of the information obtained, the Assessing Officer re– opened the assessment for both the assessment years and ultimately completed the assessment by treating the purchases made by the assessee from certain companies belonging to Shri Jignesh Patel Group companies as bogus purchases and added back to the total income of the assessee under section 69C in both the assessment years. The additions made in assessment year 2010–11 and 2011–12 in this regard are ` 67,72,643 and ` 30,27,005 respectively. Being aggrieved of the assessment order so passed assessee preferred appeals before the learned Commissioner (Appeals).

The learned Commissioner (Appeals), after considering the submissions of the assessee in the context of facts and materials on record, observed that even assuming that the assessee might have purchased the goods by investing unaccounted cash, however, the sale proceeds of the goods have been duly accounted for in the books and offered to tax. Therefore, according to him, the addition of entire purchase amount cannot be made. He was of the opinion, interest of justice would be served by making disallowance of a reasonable percentage of the purchases in order to fulfill the gap of any revenue leakage. Accordingly, he restricted the disallowance to 12.5% of the total purchases made by the assessee in both the assessment year. Against the aforesaid orders of the learned Commissioner (Appeals), the Department is not in appeal, whereas, the assessee has preferred appeals.

We have heard the learned Departmental Representative and perused the material available on record. As could be seen, on the basis of certain information available on record, the Assessing Officer concluded that the purchases made by the assessee from certain parties were merely accommodation entries, accordingly, he treated the purchases as bogus and made addition under section 69C of the Act. However, the learned Commissioner (Appeals) has restricted disallowance @ 12.5% of the total purchases on the reasoning that the entire purchases cannot be treated as income of the assessee as the assessee has recorded the sale proceeds in the books of account and offered them to tax. In our view, the reasoning and conclusion on the basis of which learned Commissioner (Appeals) has restricted the disallowance to 12.5% of the total purchases appears to be reasonable in absence of any material brought on record by assessee to controvert the findings of the first appellate authority. Accordingly, upholding the decision of the learned Commissioner (Appeals), we dismiss the grounds raised by the assessee.

In the result, assessee’s appeals for A.Y. 2010–11 and 2011–12 are dismissed. Order pronounced in the open Court on