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2019 (12) TMI 1222 - AT - Income TaxDisallowance of bogus purchases - condonation of delay - AO made additions/ disallowance by taking view that the assessee has shown purchases from the parties which are identified as hawala dealers by Sales Tax department of the State Government - HELD THAT - Assessee has fairly stated in the application/affidavit for condonation of delay that the impugned order dated 30.06.2016 was received on 16.07.2016. Considering the contents of the affidavit of the partner of the assessee that he was observing Jain Parushan from 29th August 2016 to 5th September 2016 and thereafter attend pilgrimage at Pali Thana Jain Temple and return to Mumbai only on 13.09.2016 and the appeal was filed immediately after proper consultation with Advocate on 27.09.2016. The assessee has shown bonafidely explained the delay and we have further seen that the delay is of only 13 days, thus, the delay in filing of the appeal is condoned. Bogus purchases - Even if the transaction is not verifiable, the only taxable is the taxable income component and not the entire transaction. And after considering the facts of the case and the rival contentions of the parties we are of the opinion that in order to fulfill the gap of revenue leakage the disallowance of reasonable percentage of such purchases would meet the end of justice. The Hon ble Bombay High Court in CIT Vs Hariram Bhambhani 2015 (2) TMI 907 - BOMBAY HIGH COURT held that revenue is not entitled to bring the entire sales consideration to tax, but only the profit attributable on the total unrecorded sales consideration alone can be subject to income tax. Considering the facts of the present case the disallowance on account of bogus purchases is restricted to 12% of the total impugned (disputed) purchases. The assessing officer is directed accordingly.
Issues Involved:
1. Rejection of books of account under section 145(3) of the Income Tax Act. 2. Disallowance of alleged bogus purchases. 3. Suppression of profit by booking hawala purchases. 4. Quantum of suppressed profit and its calculation. 5. Condonation of delay in filing the appeal. Detailed Analysis: 1. Rejection of Books of Account: The appellant contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in rejecting the books of account under section 145(3) of the Income Tax Act, 1961, despite no defects being pointed out. The appellant had submitted detailed information and the Form 3CD Audit Tax Report. However, this ground was not argued by the appellant’s representative and was thus treated as not pressed and dismissed. 2. Disallowance of Alleged Bogus Purchases: The case was reopened under section 147 based on information from the Sales Tax Department, Government of Maharashtra, indicating that certain hawala operators were providing accommodation bills without actual delivery of goods. The appellant was listed as a beneficiary, having allegedly made purchases from hawala dealers amounting to ?9,68,691/-. The Assessing Officer (AO) disallowed the entire purchase amount from three parties, namely M/s Shreeji Commercial Corporation, M/s Swastik Enterprises, and M/s Pawan Enterprises, citing insufficient supporting documents like transportation bills, delivery challans, goods receiving notes, and octroi receipts. 3. Suppression of Profit by Booking Hawala Purchases: The CIT(A) found that the appellant had suppressed profit by booking hawala purchases and restricted the disallowance to 25% of the disputed purchases, amounting to ?2,42,173/-. However, since this disallowance was less than the suppressed Gross Profit (GP), the CIT(A) restricted the disallowance to ?6,15,013/-, granting relief of ?3,53,948/-. 4. Quantum of Suppressed Profit and Its Calculation: The appellant argued that the disallowance sustained by the CIT(A) was excessive and that the purchases were duly supported by ledger accounts, purchase invoices, delivery challans, and payments made through banking channels. The appellant also highlighted the GP ratios for the assessment years 2007-08 to 2011-12, emphasizing that the GP ratio for the year under consideration (AY 2009-10) was 4.73%. The Tribunal noted that only the real income can be taxed and that the disallowance should be restricted to a reasonable percentage of the disputed purchases. Citing the Bombay High Court’s decision in CIT Vs Hariram Bhambhani, the Tribunal restricted the disallowance to 12% of the total disputed purchases. 5. Condonation of Delay in Filing the Appeal: The appellant sought condonation of a 13-day delay in filing the appeal, citing religious observances and pilgrimage as reasons. The Tribunal accepted the explanation, noting the delay was neither intentional nor deliberate, and condoned the delay. Conclusion: The Tribunal partly allowed the appeal, directing the AO to restrict the disallowance on account of bogus purchases to 12% of the total disputed purchases. The order was pronounced in the open court on 04/11/2019.
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