2018 (9) TMI 1681 - AT - Income Tax

Bogus purchases - The case of the Assessing Officer is that on examination of the issue of purchases of jowar; he finds and holds that these purchases amounting to ₹ 10,00,538 are to be disallowed as they are not verifiable and also not debited to the assessee s profit and loss account. Held that - If, as held by the Assessing Officer that, these purchases are both unverifiable and not debited to the assessee s profit and loss account, then the same could not be disallowed as no claim for such debit has been claimed by the assessee in the profit and loss account. In this factual view of the matter, as per the peculiar facts and circumstances of the case on hand, we delete the aforesaid disallowance of ₹ 10,00,538 made by the Assessing Officer. - Decided in favour of assessee

Summary

Issues: Disallowance of Bogus Purchases

Analysis:
The case involved an appeal against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2012-13. The assessee, a dealer in Maize, Rice, and Wheat, had declared an income of ?37,100 in the return filed. However, the assessment under Section 143(3) of the Income Tax Act resulted in the determination of the assessee's income at ?16,82,287 due to various additions and disallowances, including a disallowance of ?10,00,538 for URD Jowar Purchases. The CIT (Appeals) granted partial relief to the assessee, leading to the appeal before the Tribunal.

The main issue raised in the appeal was the disallowance of payments towards the purchase of jowar amounting to ?10,00,538 as being bogus. The Assessing Officer disallowed this amount as it was not debited in the profit and loss account. The assessee contended that since the purchases were not debited in the profit and loss account, they cannot be disallowed, as per accounting principles. The Departmental Representative for Revenue supported the orders of the authorities below.

After considering the contentions of both parties and examining the material on record, the Tribunal found that the Assessing Officer's disallowance of ?10,00,538 for bogus purchases of jowar was based on the purchases being unverifiable and not debited to the assessee's profit and loss account. Since the purchases were not claimed in the profit and loss account, the Tribunal held that the disallowance was not justified. Therefore, the Tribunal allowed Ground No. 2 of the assessee's appeal, deleting the disallowance of ?10,00,538.

As a result of the finding on Ground No. 2, the Tribunal deemed the alternate claim raised in Ground No. 3 of the assessee's appeal as academic and did not adjudicate on it. Ultimately, the assessee's appeal for the Assessment Year 2012-13 was allowed based on the deletion of the disallowance of ?10,00,538 for bogus purchases of jowar.

The judgment was pronounced in the open court on the 20th day of September 2018 by the Tribunal.