What did the Tribunal hold?

The Tribunal, following its own precedent in the assessee's own case, reduced the addition on bogus purchases from 12.5% to 6%. This was considered reasonable given the VAT rate and potential savings from grey market purchases.

The assessee made bogus purchases, leading to an addition by the Assessing Officer and CIT(A) at 12.5% of these purchases. The assessee appealed this addition.

What were the issues?

The primary issue was the quantum of addition to be made on account of bogus purchases, specifically whether 12.5% was justified or if a lower rate was appropriate.

Khilari Infrastructure Private… vs ACIT | ITAT Mumbai 2019

Income Tax Appellate Tribunal, “H” Bench, Mumbai

Before: Shri Shamim Yahya (AM) & Shri Amarjit Singh (JM)

For Appellant: Shri Hari S. Raheja

For Respondent: Shri Manoj Kumar Singh

Hearing: 4.4.2019Pronounced: 4.4.2019

O R D E R Per Shamim Yahya (AM) : These are appeals by the assessee against respective orders of learned CIT(A) for the same assessment year.

Assessment order in the above cases were reopened pursuant to information received for assessee making bogus purchases. The Assessing Officer and learned CIT(A) have made an addition of 12.5% of the bogus purchases. Against this order, the assessee has filed appeal before the ITAT.

At the outset, learned Counsel of the assessee submitted that the issue is covered in favour of the assessee by the decision of ITAT in assessee’s own case wherein identical circumstances in for A.Y. 2010-11 vide order dated 31.12.2018, this ITAT had reduced the addition from 12.5% to 6.% of the bogus purchases. Hence, learned Counsel of the assessee submitted that disallowance in this case should be restricted to 6% of the bogus purchases.

per contra, learned Departmental Representative did not dispute the proposition that in identical circumstances in assessee’s own case this Tribunal had directed that 6% disallowance should be done out of bogus purchases.

upon due consideration we note that in assessee’s own case ITAT has modified the order of learned CIT(A) and directed the Assessing Officer to disallow 6% from the bogus purchases. The ITAT concluded as under :-

“Now, after considering the arguments of the rival parties and factual matrix of the case, we are of the view that the addition made by the CIT(A) @12.5% on bogus purchases is on the higher side as the applicability of VAT is 4% in the instant case. In such scenario, the general presumption is that the assessee might have made the purchases from the grey market thereby making savings of various expenses including VAT. In these circumstances, we are of the view that, it would be reasonable in the facts of the present case if the bogus purchases are brought to tax @6%. We, therefore, set aside the order of CIT(A) and direct the AO to apply the rate of 6% on the bogus purchases as against 12.5% confirmed by the CIT(A)”.

Following the precedent from assessee’s own case, we also direct in this case that Assessing Officer should disallow 6% out of the bogus purchases.

In the result, appeals filed by the assessee stand partly allowed. Order has been pronounced in the Court on 4.4.2019.

KHILARI INFRASTRUCTURE PRIVATE LIMITED,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX-15(2)(2), MUMBAI

What did the Tribunal hold?

What were the facts?

What were the issues?

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