IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA no.6080/Mum./2018 (Assessment Year 2009 10) Income Tax Officer . Appellant Ward 25(1)(5), Mumbai v/s Yogesh M. Modi 101/102, Wellington 26, Shastri Nagar. Respondent Andheri (E), Mumbai 400 053 PAN AACPM8521A Assessee by None Revenue by Shri Chaudhary Arunkumar Singh Date of Hearing 03.09.2019 Date of Order 13.09.2019 ORDER Captioned appeal by assessee is against order dated 16th August 2018, passed by learned Commissioner of Income Tax (Appeals) 37, Mumbai, pertaining to assessment year 2009 10. 2. dispute in present appeal is confined to decision of learned Commissioner (Appeals) in restricting disallowance to 12.5% of non genuine purchases. 2 Yogesh M. Modi 3. When appeal was called for hearing, no one was present on behalf of assessee to represent case despite hearing notice having been issued to assessee. Accordingly, I proceed to dispose off appeal ex parte qua assessee after hearing learned Departmental Representative and on basis of material on record. 4. Brief facts are, assessee, individual, is engaged in business of manufacture and sale of hardware fittings. For assessment year under consideration, assessee filed his return of income on 10th July 2009, declaring total income of ` 6,82,450. return of income was initially processed under section 143(1) of Income-tax Act, 1961 (for short "the Act"). Subsequently, on basis of information received from DGIT (Inv.), Mumbai, and Sales Tax Department that purchases made from certain parties are not genuine, Assessing Officer re opened assessment under section 147 of Act. During re assessment proceedings, Assessing Officer called upon assessee to prove genuineness of purchases made of ` 422, from Chirag Corporation. Alleging that assessee was unable to prove genuineness of such purchase, he added back amount of ` 422. Further, he proceeded to verify genuineness of purchases made from four other parties representating purchases of ` 21,75,790 on test check basis in respect parties in whose cases notices issued under section 133(6) of Act returned back un 3 Yogesh M. Modi served. Therefore, he called upon assessee to prove genuineness of purchases. It is alleged by Assessing Officer that assessee failed to prove genuineness of such purchases through cogent evidences. Accordingly, he proceeded to reject Books of Account of assessee and added back purchases of ` 21,75,790. Being aggrieved with aforesaid additions, assessee preferred appeal before first appellate authority. 5. After considering submissions of assessee in context of facts and material on record, learned Commissioner (Appeals), though, agreed with Assessing Officer that assessee had failed to prove fact that purchases were made from concerned parties, however, he observed that Assessing Officer had not doubted sales effected by assessee. Thus, he observed, in such circumstances, entire purchases cannot be considered for addition but profit element embedded therein has to be added. Relying upon decision of Hon ble Gujarat High Court in CIT v/s Simit P. Sheth, [2013] 356 ITR 451 (Guj.), learned Commissioner (Appeals) directed Assessing Officer to restrict addition to 12.5% of non genuine purchases of ` 21,75,790. 6. learned Departmental Representative strongly relied upon grounds raised and observations of Assessing Officer. He 4 Yogesh M. Modi also relied upon number of case laws as submitted in written note. 7. I have considered submissions of learned Departmental Representative and perused material on record. As could be seen from facts on record, on basis of information received from Sales Tax Department and DGIT (Inv.), Mumbai, that purchases worth ` 422, made from Chirag Corporation is not genuine, Assessing Officer re opened assessment under section 147 of Act. However, in course of re assessment proceedings, Assessing Officer thought it prudent to verify genuineness of all other purchases as well. Out of notice issued under section 133(6) of Act on test check basis to some parties, notices in respect of four parties representing total purchase value of ` 21,75,790, returned back un served. Therefore, Assessing Officer treated such purchases as non genuine and added back to income of assessee. As rightly observed by learned Commissioner (Appeals), Assessing Officer has not disputed sales effected by assessee. Therefore, it would be logical to conclude that in absence of purchases, assessee could not have manufactured finished products and effected corresponding sales. Therefore, what assessee has failed to prove is source of purchase. This may lead to logical conclusion that assessee must have purchased 5 Yogesh M. Modi goods from grey market. In such circumstances, profit element embedded in such purchases has to be treated as income of assessee. decision of learned Commissioner (Appeals) in restricting addition to 12.5% of non genuine purchases, therefore, is correct and in conformity with various decisions of Tribunal and different High Courts on similar issue. That being case, I do not find any reason to interfere with decision of learned Commissioner (Appeals) on issue. Insofar as decisions relied upon by learned Departmental Representative, on careful examination, I found these decisions to be factually distinguishable, hence, not applicable to facts of present case. Accordingly, grounds are dismissed. 8. In result, Revenue s appeal is dismissed. Order pronounced in open Court on 13.09.2019 Sd/- SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED 13.09.2019 6 Yogesh M. Modi Copy of order forwarded to (1) Assessee (2) Revenue (3) CIT(A) (4) CIT, Mumbai City concerned (5) DR, ITAT, Mumbai (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai Income-tax Officer, Ward25(1)(5), Mumbai v. Yogesh M. Modi