2021 (9) TMI 210 - AT - Income Tax

Estimation of income - Bogus purchases - Commissioner (Appeals) restricted the disallowance to 12.5% of the alleged non genuine purchases - HELD THAT - As assessee was unable to furnish complete evidences to conclusively prove the source of purchases, however, the fact that the assessee had purchased the goods, possibly from unverified sources, has not been disputed by the Assessing Officer since he has accepted that the disputed goods representing such purchases were in possession of the assessee. Therefore, instead of disallowing the entire purchases, he has restricted the disallowance to gross profit rate declared by the assessee. Whereas, learned Commissioner (Appeals) has restricted such disallowance to 12.5% of non genuine purchases. The decision of Commissioner (Appeals) in restricting the disallowance to 12.5% of the non genuine purchases is fair and reasonable, hence, deserves to be upheld.

Summary

Issues:
Appeals arising from orders by Commissioner of Income Tax regarding non-genuine purchases.

Analysis:
The appeals filed by the Revenue stemmed from orders by the Commissioner of Income Tax (Appeals) for the assessment years 2010-11 and 2011-12. The primary dispute in both appeals revolved around the partial relief granted by the Commissioner in relation to additions made due to non-genuine purchases. The Assessing Officer reopened the assessments under section 147 of the Act based on information received from the Sales Tax Department indicating non-genuine purchases by the assessee. Despite the assessee providing some documentary evidence, it was deemed insufficient by the Assessing Officer. Notices issued to verify the genuineness of purchases were also un-served. Consequently, the Assessing Officer concluded that the purchases were non-genuine but acknowledged that the assessee had the disputed goods due to corresponding sales. As a result, the Assessing Officer disallowed a portion of the alleged non-genuine purchases in both assessment years. The assessee challenged these disallowances before the Commissioner (Appeals).

Upon reviewing the submissions and evidence, the Commissioner (Appeals) reduced the disallowance to 12.5% of the non-genuine purchases for both assessment years. In the appellate tribunal's analysis, it was noted that while the assessee could not conclusively prove the source of purchases, the fact that the goods were purchased was not disputed by the Assessing Officer. The tribunal found that the decision to restrict the disallowance to 12.5% by the Commissioner (Appeals) was fair and reasonable given the circumstances. The tribunal upheld the decision of the Commissioner (Appeals) based on the generally followed legal position in such cases. Consequently, the appeals were dismissed, affirming the decision of the Commissioner (Appeals) to limit the disallowance to 12.5% of the non-genuine purchases in both assessment years.