ITO-32(3)(2), MUMBAI, MUMBAI vs. SMT. RUPA J. SHAH, MUMBAI, MUMBAI

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ITA 5770/MUM/2019Status: DisposedITAT Mumbai02 July 2021AY 2010-113 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that only the profit element in unproved purchases can be taxed. It found the CIT(A)'s estimation of 12.5% to be reasonable and upheld it, considering the AO's 25% estimation to be on the higher side.

What were the facts?

The assessee obtained purchase bills from dealers declared as hawala operators. The assessee failed to prove the genuineness of these dealers and purchases, nor provided confirmations or trail of goods. The Assessing Officer disallowed 25% of the bogus purchases, which the CIT(A) reduced to 12.5%.

What were the issues?

Whether the disallowance on account of bogus purchases should be restricted to the profit element, and if so, what is the reasonable estimation for such profit.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Before: SHRI VIKAS AWASTHYSmt. Rupa J. Shah,

Hearing: 06/04/2021Pronounced: 02/07/2021

ORDER PER VIKAS AWASTHY, J.M: This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-46, Mumbai [hereinafter referred to as ‘the CIT(A)’] dated 11.06.2019 for the Assessment Year (AY) 2010-11. 2. Ms. Smita Verma representing the Department submitted that the assessee has obtained bogus purchase bills aggregating to Rs. 12,37,393/- from

1.

आअसं. 5770/मुं/2019 (िन.व.2010-11) (A.Y.2010-11) various (nine) dealers, declared as hawala operators by the Sales Tax Department, Government of Maharashtra. The assessee has failed to prove genuineness of dealers and the purchases made from them. No confirmations were filed by the assessee from the dealers nor any documentary evidence was furnished by the assessee to prove trail of goods. The Assessing Officer (AO) made disallowance of Rs. 3,09,348/- by estimating margin @ 25% on bogus purchases. In first appellate proceedings, the CIT(A) has restricted the disallowance to 12.5%. The ld. Departmental Representative (DR) pointed that estimation made by AO is reasonable and fair, therefore, the same should be upheld.

3.

Submissions made by ld. DR heard, orders of the authorities below examined. Undisputedly, the assessee failed to discharge his onus in proving genuineness of the dealers and the alleged purchases made from them. It is only the profit element embedded in such unproved purchases that can be brought to tax. The AO made estimated disallowance of 25% on bogus purchases. The CIT(A) after examining the facts and after placing reliance on the order of CIT(A) in AY 2011-12 in assessee’s own case on identical facts restricted the addition to 12.5% of bogus purchases. I am of considered view that disallowance of 25% by the AO is on higher side. I see no reason to interfere with the estimation made by CIT(A). The appeal of Revenue is dismissed, sans merit. Order pronounced in the open court on Friday, the 02nd day of July, 2021.

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