2022 (10) TMI 152 - AT - Income Tax

Estimation of income - Bogus purchases - HELD THAT - Undisputedly, the assessee has indulged in obtaining bogus purchase bills from hawala dealers as listed by the Sales Tax Department, Government of Maharashtra. The assessee failed to furnish any cogent evidence viz. delivery challans, GR, stock register to show delivery of goods. At the same time The sales turnover and the closing stock declared by the assessee have not been disputed by the Revenue. Without inputs there cannot be manufacturing/sales, therefore, in such circumstances, it is only the profit element embedded in unproved purchases that can be brought to tax and the entire bogus purchases cannot be disallowed. See PCIT vs. Paramshakhti Distributors Pvt. Ltd. 2019 (7) TMI 838 - BOMBAY HIGH COURT - CIT(A) has restricted the disallowance to 12.5% of the bogus purchases and the same has been accepted by the assessee - no infirmity in the impugned order, hence, the same is upheld and appeal of the Revenue is dismissed.

Summary

Issues:
- Disallowance of alleged bogus purchases
- Assessment for Assessment Years 2009-10, 2010-11, and 2011-12
- Appeal against orders of Commissioner of Income Tax (Appeals)
- Similarity in facts and transactions across multiple assessment years

Issue 1: Disallowance of alleged bogus purchases
In the case, the appellant, engaged in manufacturing engineering goods, faced a reassessment for the year 2009-10 due to alleged bogus purchase bills from hawala operators. The Assessing Officer disallowed purchases from suspicious dealers as the genuineness was not proven. The CIT(A) upheld this but restricted the disallowance to 12.5% of the bogus purchases. The appellant argued against the full disallowance, citing the CIT(A)'s reasoned decision. The tribunal noted the lack of evidence for delivery of goods but acknowledged undisputed sales turnover. Referring to a previous case, it held that only the profit element in unproved purchases could be taxed, upholding the CIT(A)'s decision to restrict disallowance. Consequently, the appeal by the Revenue was dismissed.

Issue 2: Assessment for Assessment Years 2009-10, 2010-11, and 2011-12
The appeals by the Revenue were directed against the orders of the Commissioner of Income Tax (Appeals) for the mentioned assessment years. Since the facts were identical across these years, they were collectively adjudicated. The reassessment for each year was based on similar grounds of alleged bogus purchases from hawala operators. The tribunal considered the arguments and decisions made for the first assessment year and applied them mutatis mutandis to the subsequent years. Consequently, the appeals for all three years were dismissed for parity of reasons.

In conclusion, the tribunal upheld the CIT(A)'s decision to restrict the disallowance of bogus purchases to 12.5% and dismissed the Revenue's appeals for all three assessment years based on the similarity of facts and transactions.