2021 (9) TMI 112 - AT - Income Tax

Estimation of income - Bogus purchases - purchases from unverified sources / grey market leading to suppression of profit - addition @12.5% out of the alleged non genuine purchases in each assessment year - specific information from Sales-tax department to indicate that certain purchases made by the assessee in the assessment years under dispute are non genuine - HELD THAT - The source of purchases at all stages remained doubtful. That being the case, the claim of the assessee that purchases have been made from the declared source is unacceptable - considering the fact that assessee failed to prove the source of purchases, it can be concluded that by adopting such means the assessee has suppressed its true profits. In the aforesaid scenario, disallowance at 12.5%, being the profit element embedded in the alleged non genuine purchases, in our considered opinion, is fair and reasonable; hence, does not call for any interference - Decided against assessee.

Summary

Issues: Disallowance/addition on account of non-genuine purchases for assessment years 2009-10, 2010-11, and 2011-12.

Analysis:
1. The appeals, arising from separate orders of the Commissioner of Income-tax (Appeals), concern disallowance/addition made on account of non-genuine purchases for the assessment years 2009-10, 2010-11, and 2011-12.

2. Despite notices, no representation was made on behalf of the assessee during the hearing, leading to the disposal of the appeals ex parte. The common ground in all appeals is the disallowance/addition related to non-genuine purchases.

3. The assessing officer, based on information from the Sales-tax department, reopened assessments for the years in question due to doubts regarding certain purchases. The assessee, a trader in mild steel products, failed to provide satisfactory evidence to prove the genuineness of the purchases, leading to the conclusion that they were non-genuine.

4. The assessing officer disallowed 12.5% of the alleged non-genuine purchases in each year, attributing it to suppression of profits. The assessee's contentions were rejected by the Commissioner of Income-tax (Appeals).

5. The ITAT upheld the decision, noting the lack of conclusive evidence from the assessee to establish the legitimacy of the purchases. The failure to serve notices under section 133(6) to verify the purchases further cast doubt on their authenticity. Consequently, the disallowance at 12.5% was deemed fair and reasonable, indicating profit suppression by the assessee.

6. The ITAT affirmed the Commissioner's decision for all assessment years, dismissing the grounds raised by the assessee. The appeals were consequently dismissed on 15/04/2021.