GHEWARCHAND M. CHOPRA HUF,MUMBAI vs. ITO -19(1)(3), MUMBAI

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ITA 885/MUM/2021Status: DisposedITAT Mumbai19 May 2022AY 2012-134 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the assessee's turnover was less than Rs. 40 lacs and profit was offered under Section 44AD, and the source of investment and corresponding sales were not doubted, the disallowance of purchases was unjustified. The addition was ordered to be deleted.

What were the facts?

The assessee claimed trading purchases of Rs. 10,56,360/-. The Assessing Officer disallowed these purchases treating them as ungenuine based on information from the Sales Tax Department. The CIT(A) confirmed this disallowance.

What were the issues?

Whether disallowance of trading purchases is justified when the assessee is opting for presumptive taxation under Section 44AD and the source of investment and sales are not doubted.

Which sections of the Income-tax Act were involved?

Section 44AD,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

For Appellant: Shri Rajkumar Singh, AR
For Respondent: Shri Anil Gupta, DR
Hearing: 19.05.2022Pronounced: 19.05.2022
1.

The present appeal has been preferred by the assessee against the order dated 25/03/2021 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).

2.

The assessee in this appeal has taken the following grounds of appeal:

“1. That the Ld. C.I.T. (Appeals) has erred in passing a non speaking appellate order in summary manner without appreciating the detailed appeal submission and evidences furnished on appeal record in confirming the disallowance made by ld. A.O. of

2. That the disallowance of entire trading purchases made by the Ld. A.O. and confirmed by Ld. C.I.T. (Appeals) being wrong on facts and bad in law on the below stated grounds therefore same may kindly be deleted: a) There is no dispute that assessee is a trader, b) Also there is no dispute about the corresponding sales made out of disputed purchases with reference to quantity and value, c) If disputed purchases has to be disallowed then corresponding sales is also required to be removed from trading account as per matching principal of accountancy and settled tax law position, d) Case of assessee being a small trader is covered U/s.44AD and ITR filed and profit offered to tax is in consonance of the said provisions, e) Payment to alleged dealer was made through proper banking channels, g) Ratio of judgement relied by Ld. C.I.T.(Appeals) to confirm the alleged disallowance is entirely misplaced and unapplicable to facts of the case of trader assessee as has been decided in several judgments of hon'ble jurisdictional High Court of Bombay and ITAT, Mumbai

3.

That the appellant craves the leave to amend alter substitute and or to raise new or additional grounds of appeal at the time of hearing.”

3. The sole issue raised by the assessee in this appeal regarding the action of the lower authorities in making disallowance of the entire trading purchases shown by the assessee of ₹10,56,360/-, treating the same as bogus purchases.

4.

At the outset, the learned counsel for the assessee has submitted that the annual turnover of the assessee is less than ₹40 lacs, therefore, the assessee has returned his profit on adhoc basis under section 44AD of the Act. So far as the question of the source of investment in the alleged bogus purchases is concerned, it has not been doubted by the Department. The sales have also not been doubted by the department. The only question is that the purchases were bogus as per the information received by the department. May it be so, the question here is that the assessee if might have purchased the products from grey

5.

In the Result, the appeal of the assessee is allowed.

Order pronounced in the open court on 19.05.2022.

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