2020 (10) TMI 707 - AT - Income Tax

Estimation of income - Bogus purchases - disallowance @ 12.5% reduced by CIT-A - HELD THAT - No doubt the purchases made from the suspected parties are not genuine. Purchases itself cannot be doubted as rightly adjudicated by Ld. CIT(A) that AO has not doubted sales declared by the assessee, only he suspected the purchases. Considering the facts of this case, by respectfully following the decision of Hon ble Gujarat High Court in the case of CIT vrs. Smith P. Sheth 2013 (10) TMI 1028 - GUJARAT HIGH COURT we are inclined to agree with the findings of Ld. CIT(A). Therefore, grounds raised by the revenue are dismissed.

Summary

Issues:
- Appeal against order of Ld. CIT(A)
- Disallowance of addition on account of bogus purchases
- Estimation of profit from Hawala purchases

Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai was filed by the revenue against the order of the Ld. Commissioner of Income Tax (Appeals) for Assessment Year 2012-13. The assessee, a proprietor of a business engaged in exporting commodities, had filed a return declaring income which was later scrutinized by the Assessing Officer. The AO made additions on account of bad debts and purchases treated as bogus. The Ld. CIT(A) partly allowed the appeal, reducing the disallowance based on the genuineness of purchases. The revenue appealed, challenging the deletion of the addition on account of bogus purchases and the estimation of profit from Hawala purchases.

The Tribunal noted that while purchases from suspected parties were not genuine, the purchases themselves could not be doubted as the sales declared by the assessee were not questioned. Relying on a decision of the Hon'ble Gujarat High Court, the Tribunal agreed with the findings of the Ld. CIT(A) and dismissed the grounds raised by the revenue. Consequently, the appeal filed by the revenue was dismissed.

Regarding the procedural issue of pronouncement of the order beyond 90 days, the Tribunal considered the exceptional circumstances caused by the nationwide lockdown due to the Covid-19 pandemic. Citing relevant legal precedents and notifications, the Tribunal excluded the lockdown period from the computation of the 90-day limit for pronouncement of orders. The Tribunal emphasized a pragmatic approach in interpreting the time limit rule, considering the unprecedented disruption in the justice delivery system. In alignment with the legal analysis and prevailing circumstances, the Tribunal allowed the appeal of the assessee and dismissed the appeal of the Assessing Officer.

In conclusion, the Tribunal pronounced the order beyond the 90-day period, in accordance with Rule 34(4) of the ITAT Rules. The order was placed on the notice board as per the procedural requirements.