Case Law Details
Shamkant Gajmal Desale Vs ITO (ITAT Surat)
ITAT Surat held that disallowance of unaccounted purchases restricted to 12.5% of purchases instead of 25% as held by CIT(A). Accordingly, addition towards unaccounted purchases restricted.
Facts- The assessee filed his return of income on 08.12.2008, declaring total income at Rs.1,05,387/- for AY.2008-09. AO issued statutory notices u/s 143(2) and 142(1), but the assessee did not furnish any reply. Subsequently, AO issued show cause notice asking assessee as to why the assessment order should not be completed u/s 144 of the Act and why the purchases should not be disallowed. The assessee did not respond and furnish the details. The AO noticed that assessee had shown total purchases of Rs.25,85,747/-. In absence to any details, the AO added the above amount and assessed the total income at Rs.26,91,130/-.
CIT(A) confirmed addition of Rs.6,46,440/- and deleted balance of Rs.19,49,307/-. Being aggrieved, assessee has preferred the present appeal.
Conclusion- Held that the CIT(A) has restricted the disallowance to 25% of the unaccounted purchases. The CIT(A) observed that appellant failed to submit any documentary evidence to prove the sales, purchases and business activity. We, thus, find that the assessee has not been able to justify its returned income by producing necessary supporting evidences. In absence of relevant details, AO disallowed the entire purchases, which was restricted to 25% by the CIT(A). Before us, the assessee has not produced any evidence of details in support of the claim to tax its profit @ 8% of the receipts. Considering the totality of the facts, we are of the considered view that the ends of justice would be met, if the disallowance is restricted to 12.5% of the purchases. Accordingly, addition of Rs.3,23,220/- is confirmed and the AO is directed to delete the remaining addition. Accordingly, the ground is partly allowed.
FULL TEXT OF THE ORDER OF ITAT SURAT
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 12.06.2024 by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment year (AY) 2008-09.
2. The grounds of appeal raised by the assessee are as under:
1) That the ld. CIT(A) is unjust on the facts as well as law in confirming the addition to the extent of Rs.6,46,440/- by disallowing 25% of total purchases of Rs.25,85,747/-. Addition so sustained is very high and unjustified and results into very high income.”
3. Brief facts of the case are that the assessee filed his return of income on 08.12.2008, declaring total income at Rs.1,05,387/- for AY.2008-09. The Assessing Officer (in short, ‘AO’) issued statutory notices u/s 143(2) and 142(1), but the assessee did not furnish any reply. Subsequently, AO issued show cause notice asking assessee as to why the assessment order should not be completed u/s 144 of the Act and why the purchases should not be disallowed. The assessee did not respond and furnish the details. The AO noticed that assessee had shown total purchases of Rs.25,85,747/-. In absence to any details, the AO added the above amount and assessed the total income at Rs.26,91,130/-.
4. Aggrieved by the order of AO, the assessee filed appeal before CIT(A). The assessee submitted that the returned income comprises of business income and income from house property. The assessee submitted that he had not received any notice u/s 143(2) or 143(1) of the Act. He submitted that the address of the assessee was different from the address mentioned in the assessment order. Since notices were issued on wrong address, the same were not received by assessee. It was further submitted that addition of entire purchases of Rs.25,87,747/- is wrong, incorrect and unjustified. The appellant is engaged in the business of hand work textile design and thus purchases are explained by the gross receipt / sales of the appellant. The submission made by assessee were forwarded to AO for remand report because they were not submitted before him. The AO submitted remand report on 15.05.2024. The AO requested that the assessment order made u/s 144 may be confirmed. The remand report of AO was forwarded to the assessee for his comment. The reply of the appellant is at pages 21 to 24 of the appellate order. The appellant admitted that purchase details are not traceable because the matter is very old. The CIT(A) observed that the assessee has not updated the address in the PAN data base. He also stated that the appellant has not disproved the findings of the AO. The CIT(A) rejected the claim of assessee to consider profit @ 8% u/s 44AD of the Act, since assessee has not offered income under provisions of section 44AD of the Act. The assessee has also not submitted any supporting documents in support of its contention. The CIT(A) after relying on the decision in case of Vijay Protein Company, (2016) 76 taxmann.com 366 (Gujarat) restricted the disallowance @ 25% of the purchases of Rs.25,85,746/-. Accordingly, addition of Rs.6,46,440/- was confirmed and balance addition of Rs.19,49,307/- was deleted.
5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The Learned Authorized Representative (Ld. AR) of the assessee submitted that the return of income was filed by the assessee on physical mode. He submitted that notices were served on wrong address and hence assessee could not attend before AO and furnish the necessary details and evidences. He further submitted that since the matter was very old, being of AY.2008-09, the details were not traceable and hence all details could not be given to the CIT(A). He requested that the profit should be estimated at 8% of the gross receipt.
6. The Learned Senior Departmental Representative (Ld. Sr. DR) for the revenue supported the order of the CIT(A).
7. We have heard both the parties and perused the materials available on record. The AO added the entire purchases of Rs.25,85,747/- by treating it as unaccounted. The CIT(A) has restricted the disallowance to 25% of the unaccounted purchases. The CIT(A) observed that appellant failed to submit any documentary evidence to prove the sales, purchases and business activity. We, thus, find that the assessee has not been able to justify its returned income by producing necessary supporting evidences. In absence of relevant details, AO disallowed the entire purchases, which was restricted to 25% by the CIT(A). Before us, the assessee has not produced any evidence of details in support of the claim to tax its profit @ 8% of the receipts. Considering the totality of the facts, we are of the considered view that the ends of justice would be met, if the disallowance is restricted to 12.5% of the purchases. Accordingly, addition of Rs.3,23,220/- is confirmed and the AO is directed to delete the remaining addition. Accordingly, the ground is partly allowed.
8. In the result, the appeal of the assessee is partly allowed.
Order is pronounced in the open court on 13/11/2024.
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