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2021 (3) TMI 314 - AT - Income TaxEstimation 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.
Issues Involved:
1. Reopening of assessments under Section 147 of the Income Tax Act. 2. Genuineness of purchases and the burden of proof. 3. Disallowance percentage for non-genuine/bogus purchases. 4. Appellate Tribunal's decision on the disallowance percentage. Issue-Wise Detailed Analysis: 1. Reopening of Assessments under Section 147 of the Income Tax Act: The assessments for the assessment years (A.Ys) 2009-10 and 2011-12 were reopened under Section 147 based on information from the Directorate General of Income Tax (Investigation), Mumbai. The information indicated that the assessee had availed accommodation entries from various dealers who provided such entries without actual transportation of goods. The Assessing Officer (AO) issued notices under Section 133(6) to verify the genuineness of the purchases, which were returned unserved. 2. Genuineness of Purchases and the Burden of Proof: The AO treated the purchases as non-genuine due to the lack of confirmations from the parties and the returned notices. The AO opined that the assessee might have made purchases in the gray market and obtained only accommodation entries. The AO disallowed 25% of the alleged bogus purchases after considering the Gross Profit (GP) already declared by the assessee. The Ld. CIT(A) emphasized that the burden of proof lies on the assessee to establish the genuineness of the purchases, referencing various judicial precedents that support this principle. 3. Disallowance Percentage for Non-Genuine/Bogus Purchases: The Ld. CIT(A) considered the submissions of the assessee and the evidences on record, including judicial pronouncements, and restricted the disallowance to 12.5% of the non-genuine purchases. The CIT(A) cited the Hon'ble Gujarat High Court's decision in Simit P. Sheth [356 ITR 461], which upheld a 12.5% disallowance as a fair profit rate for bogus purchases. The CIT(A) reasoned that while the material in question was likely received, it was not from the parties shown in the invoices, indicating purchases from different sources at lower rates due to the absence of genuine sale invoices. 4. Appellate Tribunal's Decision on the Disallowance Percentage: The Appellate Tribunal ITAT Mumbai upheld the Ld. CIT(A)'s decision to restrict the disallowance to 12.5% of the non-genuine purchases. The Tribunal found no infirmity in the CIT(A)'s order, which was based on a detailed analysis of the facts, evidences, and relevant judicial pronouncements. The Tribunal dismissed the revenue's appeals, affirming the CIT(A)'s reasoning and conclusions. Conclusion: The appeals of the revenue were dismissed, and the disallowance for non-genuine purchases was restricted to 12.5%, as determined by the Ld. CIT(A) and upheld by the Appellate Tribunal.
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