2021 (12) TMI 934 - AT - Income Tax

Estimation of income - Bogus purchases - HELD THAT - As in the case of Pankaj K. Chaudhary 2021 (10) TMI 653 - ITAT SURAT we restrict the disallowance @ 6% of impugned purchases.

Summary

Issues:
1. Disallowance of non-genuine purchases
2. Justification of disallowance percentage
3. Comparison with previous case law

Analysis:
1. The appeal pertains to the disallowance of non-genuine purchases amounting to ?2,49,88,345, reduced by the Commissioner of Income Tax (Appeals) to ?12,49,417. The Assessing Officer made the original addition based on unverifiable purchases from a supplier involved in issuing bogus bills. The appellant contested the CIT(A)'s decision, arguing for a deletion of the entire addition.

2. The key contention revolved around the percentage of disallowance, with the appellant advocating for a restriction up to the gross profit declared in audited financial statements. The Tribunal referred to a previous judgment in a similar case, where a 12.5% disallowance was reduced to 6% based on the circumstances and industry standards. The Tribunal upheld the 6% disallowance, considering the low Gross Profit Rate of the appellant.

3. The Tribunal compared the present case with the precedent set by the Hon'ble High Court in a similar matter involving Mayank Diamonds Pvt. Ltd. The Tribunal noted the differences in Gross Profit Rates between the cases, leading to the decision to sustain the disallowance at 6% for the appellant. The judgment highlighted the importance of considering industry standards and the specific circumstances of each case in determining the appropriate disallowance percentage.

Conclusion:
The Tribunal dismissed the Revenue's appeal and partly allowed the appellant's appeal by restricting the disallowance to 6% of the impugned purchases. This decision was based on a thorough analysis of the facts, industry standards, and relevant case law, ensuring a fair and just outcome in line with established legal principles.