2024 (8) TMI 489 - AT - Income Tax

Estimation of income - bogus purchases - HELD THAT - We find that the coordinate bench of the Tribunal in assessee s own case in Ashwin Moolchand Madhani 2020 (2) TMI 1722 - ITAT MUMBAI in similar factual matrix, directed that disallowance be restricted to 12.5% of the bogus purchases as reduced by the gross profit rate already declared by the assessee on these transactions. The coordinate bench further held that if the gross profit rate already declared by the assessee is more than 12.5%, then no disallowance is called for. Since, in the present case, Addl./Joint CIT(A) has followed the decision of the coordinate bench of the Tribunal in assessee s own case cited supra, we find no infirmity in the impugned directions. Appeal by the Revenue is dismissed.

Summary

Issues: Revenue's appeal against the order restricting disallowance on account of bogus purchases to the gross profit rate declared by the assessee for the assessment year 2009-10.

The Revenue appealed against the order restricting the disallowance on account of bogus purchases to the gross profit rate declared by the assessee for the assessment year 2009-10. The case involved the assessee, an individual engaged in the business of supplying building material, who initially declared a total income of INR 3,64,546 for the year. Reassessment proceedings were initiated based on information indicating non-genuine purchases amounting to INR 60,60,302. The Assessing Officer (AO) concluded that the assessee benefitted from accommodation bills without actual delivery of goods and added INR 7,57,537 to the total income as unproved/non-genuine purchases. The learned Addl./Joint CIT(A) restricted the disallowance to 12.5% of the bogus purchases as per the gross profit rate declared by the assessee, following a similar decision in the assessee's own case by the coordinate bench of the Tribunal. The Revenue challenged this decision.

The Tribunal upheld the impugned order, citing the decision in the assessee's previous case where the disallowance was limited to 12.5% of the bogus purchases reduced by the declared gross profit rate. The Tribunal clarified that if the declared gross profit rate exceeded 12.5%, no disallowance was necessary. Since the Addl./Joint CIT(A) followed this precedent, the Tribunal found no fault in the decision. Consequently, the appeal by the Revenue was dismissed, and the impugned order was upheld.

In conclusion, the Tribunal dismissed the Revenue's appeal against the order restricting disallowance on account of bogus purchases to the gross profit rate declared by the assessee for the assessment year 2009-10. The decision was based on established precedent and the specific circumstances of the case, emphasizing the importance of the declared gross profit rate in determining the extent of disallowance in such cases.