SHUBH M L SHAH & SONS STEEL P.LTD,RAIGAD vs. DCIT 10(3), MUMBAI
What did the Tribunal hold?
The Tribunal held that since the assessee possessed invoices, made payments through banking channels, had quantitative details, and the sales turnover was not disputed, the entire disallowance of purchases was not warranted. A profit element is to be accounted for in such cases.
What were the facts?
The assessee claimed purchases from parties identified as Hawala bill providers. The Assessing Officer (AO) treated these purchases as bogus due to lack of proof of physical delivery of goods. The Commissioner of Income Tax (Appeals) confirmed these additions.
What were the issues?
Whether purchases from identified Hawala bill providers can be treated as entirely bogus when sales are not disputed and payments are made through banking channels. What is the appropriate disallowance in such cases.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI MANOJ KUMAR AGGARWAL, AM
Per Manoj Kumar Aggarwal (Accountant Member)
The captioned appeals by assessee for Assessment Years [AY] 2009-10 & 2011-12 assails the common order of Ld. Commissioner of Income tax (Appeals)-24 [CIT(A)], Mumbai dated 29/05/2015 qua confirmation of certain additions with respect to bogus purchases. Since, common issue is involved in both the appeals and the same spring out of common order of Ld. CIT(A), we proceed to decide the same by way of this common order the for sake of convenience & brevity. First, we take up for AY 2009-10.
Facts leading to the dispute are that the assessee, being resident corporate assessee, was subjected to an assessment u/s 143(3) read with Section 147 for impugned AY vide Assessing Officer [AO] order dated 26/11/2013 wherein the total income was assessed at Rs.1,56,64,400/- after addition of certain bogus purchases of Rs.39,18,195/-. The original return of income was filed on 28/09/2009 at Rs.1,06,63,715/- which was assessed u/s 143(3) on 30/12/2011 at Rs.1,17,46,200/-. The assessee was engaged in the business of trading of construction material. The reassessment proceedings were triggered on the basis of information received from the investigation wing of the Income Tax Department that the assessee has obtained bogus purchase bills amounting to Rs.39,18,195/- from various parties who were listed as Hawala bill providers. In support of his claim, the assessee filed copies of invoices and ledger extracts of the alleged bogus suppliers. However, &4457/M/2015 Shubh M.L. Shah & Sons Steel Private Limited Assessment Years-2009-10 & 2011-12 not convinced, AO treated the purchases as bogus purchases on the premises that the assessee failed to establish the physical delivery of goods which led to the impugned additions. 3. The assessee contested the same before Ld. CIT(A) without any success vide impugned order dated 29/05/2015 and raised similar contentions and placed reliance on various judicial pronouncements. However, Ld. CIT(A) noted various discrepancies in the documents produced by the assessee, reached a conclusion that the purchases remained unsubstantiated by the assessee and therefore, confirmed the addition. Aggrieved, the assessee is in appeal before us. 4. The Ld. Counsel for assessee [AR] drew our attention to the fact that the assessee was a trader and reconciled the quantitative details and therefore, as sales turnover has not been doubted by the revenue, the purchase thereof could not be treated as bogus. Further, the accounts of the assessee were duly audited u/s 44AB and the assessee was in possession of purchase invoices and all payments were through banking channels and therefore, the deletion deserves to the deleted. The Ld. AR, placing on record copy of quantitative reconciliation, further contended that the assessee purchased Cement from the alleged bogus suppliers and sold the same during impugned AY itself and reflected sales revenue qua the same and therefore, addition was unjustified. 5. Per contra, the Ld. Departmental representative placed reliance on the order of Ld. CIT(A) by contending that the onus to prove the purchases beyond doubt squarely lied on the assessee which he has failed to discharge and hence, the assessee deserves full disallowance against bogus purchases. &4457/M/2015 Shubh M.L. Shah & Sons Steel Private Limited Assessment Years-2009-10 & 2011-12 6. We have heard the rival contentions and perused the relevant material on record. After analyzing the various contentions of respective representatives coupled with observation / findings of Ld. CIT(A) and after appreciating factual matrix of the case, we find that the facts of the case do not justify full disallowance against the impugned purchases particularly when the assessee was in possession of invoices, payments were though banking channels, quantitative details were available on record and sales turnover were not doubted by the revenue. The Tribunal, invariably, in all such cases, have taken a stand that even if presuming that all purchases were bogus, entire addition thereof was not warranted for particularly when the sales were not in dispute and the addition, if any, which has to be made in all such cases is to account for profit element embedded in such purchase transactions. Therefore, we restrict the said disallowance to 12.5% of alleged bogus purchases of Rs.39,18,195/- which comes to Rs.4,89,774/-. The assessee’s appeal stands partly allowed. 7. Now, we take up AY 2011-12. The assessee has suffered similar disallowance of Rs.27,05,774/- on account of bogus purchases in an assessment u/s 143(3) vide AO order dated 08/01/2014 which was confirmed by Ld. CIT(A) vide impugned order. There being no change in facts or circumstances, taking the same stand, we restrict the impugned disallowance to 12.5% which comes to Rs.3,38,222/-. Resultantly, the assessee’s appeal stands partly allowed. 8. The AO is directed to restrict the additions in terms of our above finding and re-compute Book Profits u/s 115JB and set-off/carry forward of business losses etc., if any. &4457/M/2015 Shubh M.L. Shah & Sons Steel Private Limited Assessment Years-2009-10 & 2011-12 9. In nutshell, both the appeals filed by assessee stand partly allowed.
Order pronounced in the open court on 04th May, 2017.
More judgments on Section 147
- ACIT Central Bilaspur, Bilaspur vs Arun Kumar Agrawal, SaktiITSSA 26/RPR/2025[2018-19]Status: Disposed21 Oct 2026AY 2018-19
- Vinod Agrawal, Kawardha vs Assisstant Commissioner of Income Tax…ITA 666/RPR/2026[2019-20]Status: Heard21 Oct 2026AY 2019-20
- Sar Business Tradelink Private Limited… vs Income Tax Officer, Ward - 1(2), RaipurITA 599/RPR/2026[2014-15]Status: Heard21 Oct 2026AY 2014-15
- Tarunaben Maganlal Bhut, Navagam vs ITO Ward 2(2)(1), RajkotITA 673/RJT/2026[2024-25]Status: Disposed21 Oct 2026AY 2024-25
- Neo Incorporation, Rajkot vs DCIT Circle- 1(2), RajkotITA 471/RJT/2026[2012-2013]Status: Disposed21 Oct 2026AY 2012-2013
Recent GST High Court judgments
Search GST case law →- M/S Shivam Tiles House vs. State Of U.P. And AnotherAllahabad · 21 Oct 2026
- Imtiyaz Shaikh Z Chorlekar vs. Salman ShaikhBombay · 21 Oct 2026
- Dr Babasaheb Ambedkar Marathwada University Thr Its Registrar Prashant S Amrutkar vs. Union Of INDIA Thr The Secretary And OthersBombay · 19 Oct 2026
- Babasaheb Ambedkar Marathwada University Thr Registrar Prashant S Amrutkar vs. Union Of INDIA Thr Secretary And OthersBombay · 19 Oct 2026
- Vinishma Technologies Private Limited vs. State Of KarnatakaKarnataka · 17 Oct 2026