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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SANJAY ARORA, AM
सुनवाई क� तार�ख / : 05.11.2015 Date of Hearing घोषणा क� तार�ख / : 20.11.2015 Date of Pronouncement आदेश / O R D E R Per Sanjay Arora, A. M.: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-24, Mumbai (‘CIT(A)’ for short) dated 24.06.2014, partly allowing the assessee’s appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) for the assessment year (A.Y.) 2010-11 vide order dated 19.3.2013.
(A.Y. 2010-11) R. K. Sales Corporation vs. ITO 2. The brief facts of the case are that the assessee is a firm engaged in the business of trading in waste paper, supplying old newspapers and waste paper (raddis) to paper manufacturing mills and other resellers in the said trade. Its accounts for the year revealed purchases at Rs.578.48 lacs, of which for Rs.303.99 lacs were from unregistered dealers and the balance Rs.274.49 lacs from registered dealers. The assessee explained the unregistered purchases as being from Hawkers (Raddiwalas) who collect the waste paper from door to door, and which it makes in lots of 100/200 kgs. Complete details, both in the quantity and in value, stood maintained; the assessee maintaining both, purchase and sale registers, as well as stock register. It did not, however, on being called upon to, furnish the names and addresses of the suppliers from whom the unregistered purchases were made. The assessee’s explanation that this was so as it was operating in an unorganized sector, was found not valid. By own admission, the payments to the suppliers were made 15 to 45 days from the date of sale of the goods (by the assessee), so that the goods were purchased by it on credit. In fact, the assessee was purchasing goods from principally the same set of persons, and operating in an organized manner. The purchases, the onus to establish which was squarely on it, were not amenable to proper verification. The Assessing Officer (A.O.), accordingly, disallowed 2% of the said purchases, i.e., Rs.6,07,974/-, considering the same as unverifiable/inflated to that extent, and assessed the assessee’s business income accordingly. In appeal, the ld. CIT(A) concurred with the findings of the A.O.; the assessee being unable to improve upon its case in any manner. The assessee was running an organized business, purchasing goods on credit, and from substantially the same set of suppliers. It was therefore not understood that why their names and addresses could not be adduced, so that resulting purchases, which were in cash, were unverifiable. He, however, in view of the assessee having, at 4.43%, returned a higher gross profit ratio than that for A.Y. 2008-09 (at 4.08%), reduced the disallowance to 1.5% (from 2%) of the impugned purchases. Aggrieved, the assessee is in second appeal.
(A.Y. 2010-11) R. K. Sales Corporation vs. ITO 3. Before us, it was submitted by the ld. Authorized Representative (AR), the assessee’s counsel, that the very same issue had arisen in the assessee’s case for A.Y. 2008-09 (in wherein the Tribunal vide its order dated 25.02.2015 (copy on record), even as it found that the assessee had not been able to substantiate its purchases, and thus discharge the onus for establishing its claim for deduction in its respect, held that there was no justification for the A.O. for adopting 2% of the relevant purchases; the Revenue citing no comparative cases while making the disallowance, which it restricted to Rs.2 lacs. The same was prayed for being adopted in-as-much as he agreed that some estimate in the matter would have to be necessarily made. The ld. Departmental Representative (DR), on the other hand, would submit of the matter being totally factual, so that the order by the tribunal for A.Y. 2008-09 did not lay down any binding precedent for being adopted.
The parties stand heard, and the material on record perused. The first observation in the matter is that the facts and circumstances of the case and, as it appears, the argument set up in canvassing the respective cases is the same as that for A.Y. 2008-09. True, the burden of proof is on the assessee, who could not state any reason, much less cogent, for non-submission of the names and addresses of the suppliers of goods purchased in the non-registered dealer category. Again, the order by the tribunal in A.Y. 2008-09 cannot be said to lay down any binding precedent in-as-much as the issue is essentially one of estimate, i.e., the extent to which the purchases may be considered, in the facts and circumstances of the case, as inflated. The tribunal again has not specified any basis, and made an ad-hoc estimate, at a sum which it considered reasonable to plug the leakage of the revenue. In this regard it needs to be appreciated, even as argued by the ld. AR, that the Revenue has not segregated (or caused to) the gross profit earned on the registered and non-registered purchases – which could be, given that the assessee is maintaining the relevant records, viz. purchase, sale and stock registers , or otherwise made out (A.Y. 2010-11) R. K. Sales Corporation vs. ITO any case with reference to the pricing of the goods bought as unregistered purchases vis-à-vis that bought from registered dealers. The ld. CIT(A) has noted the gross profit to be comparable; rather, improved, with reference to that for A.Y. 2008-09. Under the circumstances, I find no reason to estimate in excess of that by the tribunal in the assessee’s case for A.Y. 2008-09, so that I restrict the disallowance on account of unverifiable cash purchases from unregistered dealers to, again, a flat sum of Rs.2 lacs. I decide accordingly, and the assessee gets part relief.