2024 (3) TMI 1012 - AT - Income Tax

Estimation of income - bogus purchases - case of bogus bills arranged from the entities and diamonds purchased from somewhere else at a lower cost - CIT(A) restricted the disallowance to 12.5% of the alleged bogus purchases - HELD THAT - Since the profit margin embedded in the transaction of alleged bogus purchases of cut and polished diamonds has been accepted at 5% in other years in assessee s own case, following the rule of consistency in view of the peculiar facts of the present case, we deem it appropriate to restrict the disallowance to 5% of the disputed purchases in the year under consideration. As a result, grounds raised by the assessee on merits are partly allowed.

Summary

Issues Involved:
The judgment involves challenges to the re-assessment and disallowance of purchases for the assessment years 2007-08, 2009-10, and 2012-13 under section 250 of the Income Tax Act, 1961.

Assessment Year 2007-08:
The assessee challenged the re-assessment and disallowance of purchases. The Assessing Officer disallowed the entire purchases as bogus, but the CIT(A) restricted the disallowance to 12.5% based on a Gujarat High Court decision. The ITAT found the assessee failed to prove the genuineness of purchases, suggesting a reasonable disallowance to prevent revenue leakage. Following consistency in other years, the disallowance was restricted to 5% of disputed purchases, partly allowing the appeal.

Assessment Years 2009-10 and 2012-13:
The appeals for these years involved similar issues of disallowance on account of alleged bogus purchases. The ITAT applied the same reasoning as in the 2007-08 assessment, restricting the disallowance to 5% of disputed purchases. The grounds challenging the invocation of proceedings under section 147 were not argued and dismissed as not pressed. Consequently, the appeals for these years were partly allowed.

In conclusion, all the appeals by the assessee challenging the re-assessment and disallowance of purchases for the assessment years 2007-08, 2009-10, and 2012-13 were partly allowed by the ITAT Mumbai.