Kishorkumar M Vyas Vs ITO (ITAT Mumbai)
The Mumbai Bench of the Income Tax Appellate Tribunal disposed of connected appeals filed by two assessees, an individual and an HUF, for Assessment Years 2009-10 and 2010-11 involving common issues relating to the validity of reassessment under Section 147 of the Income-tax Act, 1961 and disallowance on account of alleged non-genuine purchases.
The assessees, engaged in the business of trading in iron and steel and allied products, had filed their returns of income in the regular course. For Assessment Year 2009-10, the assessments had originally been completed under Section 143(3), whereas for Assessment Year 2010-11, the returns had only been processed under Section 143(1). Subsequently, the Assessing Officer received information from the Sales Tax Department through the Investigation Wing indicating that the assessees had obtained accommodation entries in the form of non-genuine purchase bills from entities identified as hawala operators. Based on this information, the assessments were reopened under Section 147.
During reassessment proceedings, the Assessing Officer sought evidence to establish the genuineness of the purchases. Although the assessees produced certain supporting documents, the Assessing Officer found that they had failed to establish that the goods were actually purchased from the concerned parties. Notices issued under Section 133(6) also did not yield any response. The books of account were rejected under Section 145(3). However, considering that the assessees had furnished quantitative details of purchases and sales, the Assessing Officer concluded that goods had been procured from unverified sources and only the profit element embedded in such purchases was liable to be added. Accordingly, disallowance was restricted to 12.5% of the alleged non-genuine purchases. The Commissioner (Appeals) granted partial relief by directing that the gross profit/net profit already disclosed by the assessees be reduced while computing the addition.
