2020 (10) TMI 877 - AT - Income Tax

Non genuine purchases - CIT- A restricted addition to 12.5% - HELD THAT - We fully agree with Commissioner (Appeals) that under the given facts and circumstances, the entire purchases made by the assessee could not be disallowed but only the profit element embedded in such purchases can be considered for addition. No hesitation in upholding the decision of the learned Commissioner (Appeals) in restricting the disallowance to 12.5% of the alleged non genuine purchases. As rightly observed by Commissioner (Appeals), the purchases worth ₹ 39,88,556, made from Sharp Print having been proved through confirmation and supporting evidences, cannot be treated as bogus. Accordingly, we uphold the decision of learned Commissioner (Appeals) by dismissing the grounds raised by the Revenue.

Summary

Issues:
Appeal by Revenue against partial relief on non-genuine purchases.

Analysis:
The appeal pertains to the assessment year 2009-10, where the Revenue challenged the partial relief granted by the Commissioner of Income Tax (Appeals) regarding the addition made on account of non-genuine purchases. The assessee, engaged in trading, filed a return declaring income, which was re-opened by the Assessing Officer based on information from the Sales Tax Department. The Assessing Officer disallowed purchases worth ?8,57,867 as unexplained expenditure, alleging lack of proof of genuineness and involvement of accommodation bills. Additionally, purchases worth ?67,22,680 were also disallowed due to lack of proper documentation and non-response to notices. The first appellate authority restricted the disallowance to 12.5% of the non-genuine purchases, excluding certain purchases made from a specific party.

Upon review, the Tribunal found that the assessee had provided various documents to support the purchases identified as non-genuine. It was noted that while some parties admitted to providing accommodation bills, the sales made by the assessee were not in question. The Tribunal agreed with the Commissioner (Appeals) that only the profit element embedded in the purchases should be considered for addition, leading to the decision to uphold the 12.5% disallowance. Specifically, purchases worth ?39,88,556 from a particular party were deemed genuine as the party confirmed the sales and provided supporting evidence. Consequently, the Tribunal dismissed the Revenue's grounds and upheld the decision of the Commissioner (Appeals).

In conclusion, the Tribunal dismissed the appeal, affirming the decision to restrict the disallowance to 12.5% of the alleged non-genuine purchases, while recognizing the legitimacy of purchases made from a specific party. The judgment emphasized the importance of considering the profit element in such cases and upheld the decision based on the facts and circumstances presented during the assessment.