Question 1

What are the key legal issues in Sumerlal K Sheth vs. Income Tax Officer?

Accepted Answer

1. Addition of 12.5% of alleged non-genuine purchases 2. Rejection of books of account under section 145(3)

Question 2

What are the facts of Sumerlal K Sheth vs. Income Tax Officer?

Accepted Answer

The assessee, Sumerlal K Sheth, is an individual engaged in the business of trading in ferrous and non-ferrous metals. For the assessment year 2011-12, the assessee filed an income return declaring a total income of Rs.11,33,921/-. Subsequently, information from the Directorate General of Income Tax (Investigation) indicated that the assessee had obtained accommodation entries in the form of alleged bogus purchases from certain parties. The assessment was reopened, and a notice under section 148 of the Act was issued. The Assessing Officer rejected the books of account under section 145(3) of the Act and treated the purchases as non-genuine. An addition of Rs.48,07,147/- was made, representing 12.5% of the alleged non-genuine purchases of Rs.3,84,57,177/-. The assessee appealed against the order of the Joint Commissioner of Income-tax (Appeals), which upheld the rejection of the books of account and the addition. The assessee argued that the decision of the Coordinate Bench in the assessee’s own case for the immediately preceding assessment year should be followed, which had reduced the rate of profit element from 12.50% to 5%. The Tribunal found the controversy materially similar and reduced the percentage of profit element on the disputed purchases from 12.5% to 5%.

Sumerlal K Sheth vs. Income Tax Officer

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