2021 (3) TMI 313 - AT - Income Tax

Estimation of income - Bogus purchases - disallowance @ 12.5% restricted by CIT-A - HELD THAT - We find that the Ld. CIT(A) considered this aspect of the matter elaborately with reference to the submissions of the assessee and the averments in the Assessment Order and following in the case of CIT v. Simit P. Sheth 2013 (10) TMI 1028 - GUJARAT HIGH COURT restricted the disallowance to 12.5% of the non-genuine purchases. No infirmity in the order passed by the Ld. CIT(A) in restricting the addition/disallowance to the extent of 12.5% of the purchases. - Decided in favour of assessee.

Summary

Issues:
Appeal against order restricting disallowance of purchases to 12.5% as non-genuine/bogus by Assessing Officer for AY 2010-11.

Analysis:
1. The appeal was filed by the Revenue challenging the order of the Ld. CIT(A) for AY 2010-11. The Revenue contested the Ld. CIT(A)'s decision to limit the disallowance of purchases to 12.5% instead of treating the entire amount as non-genuine/bogus. The Assessing Officer reopened the assessment based on information regarding accommodation entries, suspecting the genuineness of purchases from a specific dealer, M/s. V.M. Udyog.

2. The Assessing Officer deemed the purchases non-genuine due to lack of documentary evidence regarding the movement of goods and non-appearance of parties before him. Despite the assessee's submissions, the Assessing Officer added the full amount of purchases to the income. The Ld. CIT(A), after considering various submissions and evidence, restricted the disallowance to 12.5% of the non-genuine purchases.

3. During the appeal, no representation was made by the assessee, and the Ld. DR supported the Assessing Officer's decision. The Ld. CIT(A) extensively analyzed the case, referring to relevant legal precedents, and concluded that the assessee had provided sufficient evidence to explain the purchases. The Ld. CIT(A) highlighted that the invocation of Section 69C was not appropriate in this scenario as the source of expenditure was adequately explained through bank transactions and purchase invoices.

4. The Ld. CIT(A) also considered the suspicion raised by the Sales Tax Department regarding the supplier, M/s. V.M. Udyog, but emphasized that documentary evidence supported the genuineness of purchases. Referring to previous ITAT and High Court decisions, the Ld. CIT(A) justified the restriction of disallowance to 12.5% of the disputed purchases. The decision was based on the principle of estimation of additional profit rather than total disallowance.

5. Upon reviewing the Ld. CIT(A)'s order and reasoning, the Tribunal found no error in restricting the addition to 12.5% of the purchases. Consequently, the Revenue's appeal was dismissed, upholding the Ld. CIT(A)'s decision. The pronouncement of the order was made on 11.01.2021 as per ITAT Rules.