2024 (1) TMI 839 - AT - Income Tax

Estimation of income - Bogus purchases - disallowances involving GP component - HELD THAT - Assessee could neither file confirmation of its suppliers nor the AO s notices could be served on them as per the assessment findings. Faced with this situation, Mr. Joshi has taken pains to compile the corresponding details in all these three assessment years regarding assessee s bogus and unverified purchases for being assessed at uniform rate. We hold that once the bogus purchases have attained finality, the only consequence is that they do not deserve to be treated at par with the latter category in light of the overwhelming evidence in this case file. Revenue has also quoted a catena of case law wherein such bogus purchases stand assessed at varying margins from 5-12%. We deem it appropriate in these peculiar facts to conclude that a lump sum disallowance of 6% in all these three cases would meet the ends of justice with a rider that the same shall not be taken as a precedent. Necessary computation shall follow as per law.

Summary

Issues involved:
The judgment involves multiple issues including the applicability of a specific court decision, the treatment of bogus purchases in trading business, and the computation of disallowances involving the GP component.

Applicability of Court Decision:
The judgment pertains to three Revenue appeals against orders passed under the Income Tax Act. The Tribunal deliberated on the applicability of the hon'ble apex court's decision in a specific case, N.K. Proteins Ltd. vs. DCIT, as per remand directions. The Tribunal concluded that the decision was not applicable to the current case, leading to a fresh hearing of the appeals.

Treatment of Bogus Purchases:
The Tribunal discussed the treatment of bogus purchases in the trading business context. Referring to a recent court decision, the Tribunal emphasized that purchases cannot be rejected without affecting sales in the case of a trader. The judgment highlighted the importance of maintaining consistency between purchases and sales, leading to a specific percentage disallowance for the bogus purchases in question.

Computation of Disallowances Involving GP Component:
The Tribunal further analyzed the computation of disallowances related to the GP component. It considered the total purchases, gross sales, and the specific bogus purchases made by the assessee. Due to the lack of supplier confirmations and unsuccessful service of notices, the Tribunal decided on a lump sum disallowance of 6% across the three assessment years to ensure justice. This decision was made with the understanding that such disallowances should not set a precedent for future cases.

Separate Judgment by Judges:
The judgment was delivered by SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER, and DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER. The appeals were partly allowed based on the issues discussed and the conclusions reached. The Tribunal emphasized the need for a fresh hearing based on the specific circumstances and legal considerations presented in the case files.