RAMESH SAWANTMAL BHANSALI,MUMBAI vs. INCOME TAX OFFICER 19(3)(1), MUMBAI

ITA 4690/MUM/2018Status: HeardITAT Mumbai05 November 2019AY 2010-114 pages

AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that 100% disallowance for bogus purchases is not justified when sales are not doubted, as sales are impossible without purchases. The addition should be limited to the profit element, aligning the gross profit rate on disputed purchases with that of genuine purchases.

What were the facts?

The assessee, engaged in ferrous and non-ferrous metal trading, faced re-assessment due to information about bogus purchases. While purchase vouchers and banking channel payments were provided, suppliers were not produced. The Assessing Officer made a 25% addition, which the CIT(A) reduced to 12.5%.

What were the issues?

Whether disallowance for bogus purchases can be 100% when sales are not doubted, and how to quantify the profit element in such purchases.

Which sections of the Income-tax Act were involved?

Not explicitly mentioned in the provided text, but the issue pertains to disallowance of purchases.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

For Appellant: Shri Rajkumar Singh, Shri Chaitanya Anjaria-DR

For Respondent: Shri Chaitanya Anjaria-DR

आयकरअपील सं./ (िनधा"रण वष" / Assessment Year:2010-11) Ramesh Sawantmal Bhansali Income Tax Officer,19(3)(1) C/o, D.C. Bothra & Co. LLP (CA) Mumbai. (formerly known as D.C. Bothra & Co.) बनाम/ 297, Tardeo Road, Wille Mansion Vs. 1st Floor, Opp. Bank of India Nana Chowk Mumbai-400 007. "थायीलेखासं./जीआइआरसं./PAN/GIR No. AEMPB 0518 A (अपीलाथ"/Appellant) : (""थ" / Respondent) अपीलाथ"कीओरसे/ Appellant by : Shri Rajkumar Singh ""थ"कीओरसे/Respondent by : Shri Chaitanya Anjaria-DR सुनवाईकीतारीख/ : 20/08/2019 Date of Hearing घोषणाकीतारीख / : 5/11/19 Date of Pronouncement आदेश / O R D E R Shamim Yahya (Accountant Member):-

1. 1. This is an appeal by the assessee wherein the assessee is aggrieved that the learned CIT-A has erred in sustaining 12.5% disallowance on account of bogus purchases, vide order dated 13/04/2018 pertaining to assessment year 2010-11. 2 Ramesh Sawantmal Bhansali Assessment Year-2010-11 2. Brief facts of the case are that assessee in this case is engaged in the business of trading in ferrous & non-ferrous metal.

3. The assessment in this case was re-opened upon receipt of information from sales tax Department that assessee has made bogus purchases. The assessee submitted the purchase vouchers and the payments were made through banking channel. However, the suppliers were not produced before the Assessing Officer. Sales in this case were not doubted.

4. The Income tax Officer in this case has made 25% addition on account of bogus purchase resulting in disallowance of Rs.76,12,297/-. Upon assessee’s appeal Ld. CIT(A) restricted the same to 12.5%.

5. Against the above order assessee is in appeal before the ITAT. I have heard both the counsel and perused the records.

6. Upon careful consideration I find that the assessee has provided the documentary evidence for the purchase. Adverse inference has been drawn due to the inability of the assessee to produce the suppliers. I 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 Hon'ble Jurisdictional High Court decision in the case of Nikunj Eximp enterprises (in Writ Petition No.2860 order dated 18/06/2014). In this case the Hon'ble High Court has upheld hundred percent allowance for the purchases said to be bogus when sales

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