BRAHAM DEV GUPTA,NEW DELHI V. ACIT RANGE-32 & SPECIAL RANGE - 11, NEW DELHI

ITA 2049/DEL/2019

AI Insights

The case involves Braham Dev Gupta, the proprietor of M/s DSM INTERNATIONAL, who appealed against the order of the Commissioner of Income Tax (Appeals)-11, New Delhi, which upheld the disallowance of purchases made from 22 suppliers amounting to Rs. 244,00,28,880 due to their unverifiable nature. The Assessing Officer had initially disallowed these purchases after finding that the suppliers did not respond to notices under section 133(6) of the Income-tax Act, 1961. The Tribunal, after considering the corresponding sales and stock records, estimated a profit margin of 2.5% on these purchases instead of completely disallowing them.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470223 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: MAHESH KUMAR
• Section: 143(3); 153; 22; 133(6)

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 2049/Del/2019 (Assessment Year: 2014-15) Braham Dev Gupta, 6/842, Mahrauli, New Delhi-110030 Vs. Joint Commissioner of Income Tax, Range-32, & Special Range-11, New Delhi (Appellant) (Respondent) PAN: AAFPB5907Q Assessee by : Shri Mahesh Kumar, CA Revenue by: Shri Rajesh Kumar Dhanesta, Sr. DR Shri Zafarul Haque Tanveer, CIT DR Date of Hearing 24/01/2025 Date of pronouncement 29/01/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.2049/Del/2019 for AY 2014-15, arises out of the order of the Commissioner of Income Tax (Appeals)-11, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. 272/17-18 dated 31.12.2018 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 30.12.2017 by the Assessing Officer, JCIT, Special Range- 11, New Delhi (hereinafter referred to as ‘ld. AO’). 2. The assessee had raised additional grounds stating that the assessment is time barred. But at the time of hearing, the learned AR before us submitted that on verification and inspection of the records ITA No. 2049/Del/2019 Braham Dev Gupta Page | 2 from the file of the revenue, the learned assessing officer had referred the matter to UAE tax authorities through Foreign Tax and Tax Research Division of CBDT for seeking certain information. On perusal of the same, the assessee was convinced that the learned assessing officer had an extended time limit to frame the assessment within the provisions of section 153 of the Act and hence, the learned AR sought to withdraw the additional grounds raised before us. In view of the same, the additional grounds though were admitted vide order sheet noting dated 27-06-2023, the same are hereby dismissed in view of the above mentioned submissions of the learned AR. 3. The only effective issue to be decided in the instant appeal is as to whether the learned CIT(A) was justified in confirming the addition made on account of unverifiable purchases in the facts and circumstances of the instant case. 4. We have heard the rival submissions and perused the materials available on record. The return of income for the assessment year 2014-15 was filed by the assessee on 21-11-2014 declaring total income of Rs 2,13,55,410/-. The assessee is engaged in the business of 100% export of readymade garments under the name and style of M/s DSM INTERNATIONAL, later known as M/s RBD INTERNATIONAL. The assessee is the proprietor of the said business engaged in the business of export of readymade garments, hosiery garments, handicraft furnishing items etc. The assessee furnished the entire books of accounts, bills, vouchers of all the expenses and all the incomes reflected in the Profit and Loss Account. The assessee produced the stock registers before the learned AO. The entire books ITA No. 2049/Del/2019 Braham Dev Gupta Page | 3 of accounts together with all the documentary evidences including the stock registers were duly examined by the learned AO and the book results were not sought to be disturbed by the learned AO and the books were not rejected by the learned AO. 5. During the course of assessment proceedings, the Learned AO sought to examine the veracity of purchases made by the assessee from various parties. The details for the same were sought for from the assessee by the Learned AO which were duly furnished. The Learned AO found that out of 111 suppliers list furnished by the assessee, the Learned AO selected 58 suppliers thereon and issued notice under section 133(6) of the Act to each of those 58 suppliers seeking for certain information. Out of that, 36 suppliers responded directly before the Learned AO by furnishing the requisite information in response to notice under section 133(6) of the Act. 22 suppliers did not respond to the notice issued under section 133(6) of the Act before the Learned AO. The value of purchases made by the assessee from 22 suppliers worked out to Rs. 244,00,28,880/-. Accordingly, the Learned AO proceeded to disallow the value of purchases made from these unverified 22 suppliers to the tune of Rs. 244,00,28,880/- and added the same in the assessment. This action of the Learned AO was upheld by the Learned CIT(A). 6. The Learned DR vehemently submitted that the 22 suppliers had not responded to the notice issued under section 133(6) of the Act. He submitted that assessee could not furnish evidences with contemporaneous documents to prove the veracity of the purchases made from the 22 suppliers. He drew our attention to various ITA No. 2049/Del/2019 Braham Dev Gupta Page | 4 observations made by the Learned AO in the assessment order. Hence he submitted that the lower authorities were duly justified in disallowing the value of purchases made from these 22 suppliers on the ground that they are unverifiable. 7. We find that assessee had given the details of purchases made from the 22 suppliers and also furnished the details of corresponding sales made by the assessee out of these disputed purchases. These details are very much available on record and not doubted by the revenue. The corresponding sales details furnished by the assessee out of disputed purchases were not doubted by the revenue. The stock registers were admittedly filed by the assessee before the Learned AO wherein the purchases made from the 22 suppliers have been duly brought in as goods inward and the corresponding sales made thereon have been duly reduced from the available stock in the stock registers. The Learned AO had merely sought to make some observations with regard to the fact of assessee’s family member being involved in fraudulent claim of enhanced claim of duty drawback by inflating the price of sales. Though the Learned AO had made certain observations regarding this, ultimately in the final determination of total income and computation of tax liability, the Learned AO had not drawn any adverse inference with regard to the said observation and merely disallowed the value of purchases made from these 22 suppliers who did not respond to the notice issued under section 133(6) of the Act. Hence, it could be safely concluded that the issue involved herein is only with regard to disallowance of unverified purchases by the Learned AO which stood confirmed by the ITA No. 2049/Del/2019 Braham Dev Gupta Page | 5 Learned CIT(A). Infact the argument of the Learned DR also was only with regard to disallowance of unverifiable purchases. Accordingly, we also confine our discussions only to the issue of disallowance of unverified purchases in this appeal. 8. As stated earlier, the corresponding sales made by the assessee out of disputed purchases were not doubted by the revenue. Similarly, the stock registers were duly furnished by the assessee before the lower authorities and the same were not doubted. The entire books of accounts have been placed before the Learned AO and the book results were accepted by the Learned AO and the same were not rejected by him. At the same time, the assessee also from its side could not prove the purchases made from 22 parties beyond reasonable doubt. Hence, it becomes a case of unverifiable purchases. We find that the corresponding sales had not been doubted by the revenue and without effecting purchases, there cannot be any sales. Hence, it could be safely concluded that assessee could have made purchases from grey market in order to have some savings in indirect taxes, cash discount etc. Hence, this is a case wherein only profit estimation need to be made and that alone should be brought to tax in the hands of the assessee. The Learned AR before us drew our attention to Page No. 803 of the paper book part 3 containing the gross profit chart from assessment year 2004-05 onwards. On perusal of the said chart, we find that the average of last 3 years gross profit rate worked out to 1.55 percent and during the year under consideration, the assessee had earned gross profit of 1.6 percent. The Learned AR also submitted that in most of the earlier years, the ITA No. 2049/Del/2019 Braham Dev Gupta Page | 6 assessments were completed under section 143(3) of the Act in the case of the assessee and no adverse inference was drawn thereon. But the case involved herein is a case of unverifiable purchases where the profit margin would be slightly higher as purchases had been made in the grey market. Accordingly, we deem it fit and appropriate to estimate the profit margin embedded in the value of such disputed purchases at 2.5%, which in our considered opinion, would meet the ends of justice. Accordingly, the Learned AO is directed to make an addition of 2.5% of disputed purchases of Rs 244,00,28,880/- in the instant case. Accordingly, the grounds raised by the assessee are partly allowed. 9. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 29/01/2025. -Sd/- -Sd/- (ANUBHAV SHARMA) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 29/01/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "