ITO 27(1)(4), MUMBAI vs. SHRI INDERJEET SINGH BHABRA, MUMBAI

PDF · subscribers
ITA 3633/MUM/2019Status: DisposedITAT Mumbai21 October 2020AY 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 upheld the deletion of the addition by the CIT(A). It noted that when sales are not doubted, a 100% disallowance for bogus purchases is not justified, and in this case, the amount was already taxed as income in a later year.

What were the facts?

The Assessing Officer added Rs. 1,56,000/- for bogus purchases made by the assessee. The assessee stated that the purchases were of inferior quality, and since payment was refused and the goods not replaced, the amount was offered as income in a subsequent assessment year.

What were the issues?

Whether 100% disallowance of purchases is justified when sales are not doubted, and if the subsequent offering of the amount as income rectifies the issue.

Which sections of the Income-tax Act were involved?

Section 41(1)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.

  • 250 ITR 22
    250 ITR 22
    36 citing

Income Tax Appellate Tribunal, “SMC” Bench, Mumbai

For Appellant: Shri Jeetendra Kumar
For Respondent: Shri Mehul Shah
Hearing: 20.10.2020Pronounced: 21.10.2020

O R D E R Per Shamim Yahya (AM) :- This is an appeal by the revenue wherein the revenue is aggrieved that the Learned Commissioner of Income Tax (Appeals) [in short learned CIT(A)] has erred in deleting the addition of Rs. 1,56,000/- done @ 100% by the Assessing Officer.

2.

The assessee in this case is engaged into the business of engineering and fabrication work. The assessment was reopened upon information from sales tax department that assessee has made purchases of Rs.1,56,000/- from bogus dealers. The Assessing Officer made 100% addition of the bogus purchases.

3.

Upon assessee's appeal learned CIT-A has noted that the said purchases has been offered as income u/s. 41(1) in A.Y. 2015-16. Hence he deleted this disallowance by holding as under :- “The Grounds No. 1 & 2 of the appeal are against the addition of Rs. 1,56,0007- as non-genuine purchases. During the appellate proceedings it was stated that the purchase of Rs. 1,56,000/- from M/s Montex Industries was of inferior quality, therefore appellant refused to make payment. The goods were not replaced. Therefore, in A.Y 2015-16 appellant has written

2 Shri Indrjeet Singh Bhabra back this amount in his books of accounts and paid tax. Copy of P & L Account and supporting documents were filed. It was argued that appellant has already paid tax on the alleged purchase and no further addition can be made on this purchase again. In view of these facts of the case I am in agreement with the submission of the appellant accordingly the addition of entire bogus purchase of Rs. 1,56,0007- is deleted. These grounds of appeal are 'Allowed.'”

4. Against above order revenue is in appeal before the ITAT. We have heard both the counsel and perused the records. We find that in this case the sales have not been doubted it is settled law that when sales are not doubted, hundred percent disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from honourable jurisdictional High Court decision in the case of Nikunj Eximp Enterprises (in writ petition no 2860, order dt. 18.6.2014). In this case the honourable High Court has upheld hundred percent allowance for the purchases said to be bogus when sales are not doubted. Moreover, we note the assessee plea that since the impugned purchases were of inferior quality assessee made efforts to refund the same. Being unsuccessful he offered the same as income in A.Y. 2015-16. Learned CIT(A) has given a factual finding in this regard. Thus no prejudice is caused to the revenue as impugned sum has already been shown as income subsequently. Hence, we do not find any infirmity in the order of learned CIT(A). Hence, we uphold the same.

5. The decision of N.K. Proteins Ltd. (250 ITR 22) relied by the revenue was a dismissal of SLP by the Hon'ble supreme court and has already been explained and distinguished by Hon'ble Bombay high court in the case of M. Hazi Adam & Co. (ITA No. 1004 of 2006 dated 11.2.2019).

6.

In the result this appeal filed by the revenue stands dismissed.

More judgments on Section 41(1)

All 1,943 judgments and leading authorities on Section 41(1) →

Recent GST High Court judgments

Search GST case law →