ITAT Mumbai Judgments — August 2017

The Tribunal held that the excess of sale price over purchase price of IMFL products, though termed royalty by the assessee, did not represent the assessee's income but belonged to BDA Limited. The assessee acted as a distributor and was only entitled to distribution charges and reimbursement of expenses.

The Tribunal found that documents filed by the assessee before it, which were not examined by the CIT(A) due to non-compliance, had a bearing on the issue. Therefore, the CIT(A)'s order was set aside to allow the assessee a reasonable opportunity to be heard and to examine the new documents.

The Tribunal noted that the assessee submitted crucial documents for the first time before the CIT(A), which were not presented to the AO. To ensure proper verification, the matter was restored to the AO for a fresh assessment.

The Tribunal found that neither the AO nor the CIT(A) had properly examined the impact of the proviso to Section 2(15) and the principles of mutuality. Therefore, the matter was restored to the AO for a fresh assessment.

The Tribunal held that while the suppliers were suspicious, the assessee had made payments by account payee cheques and the sales receipts were not disputed. Therefore, the entire purchase amount could not be disallowed. The addition was restricted to 12.5% of the disputed purchases.

The Tribunal held that merely because suppliers were not found or confirmed, it cannot be presumed that purchases were not made, especially when payments were made by account payee cheques and sales were not disputed. The addition was restricted to 5% of the purchases.

The Tribunal found that the facts of the case were distinguishable from the case laws relied upon by the assessee. The Tribunal noted the agreement for revaluation of assets and liabilities of the erstwhile partnership firm, which was not produced. Therefore, the Tribunal set aside the CIT(A)'s order.

The Tribunal held that the assessee failed to prove the identity, creditworthiness, and genuineness of the transaction as required under Section 68 of the Income Tax Act. The explanation provided was contradictory and lacked substantive evidence.

The Tribunal upheld the CIT(A)'s decision to tax only the profit element embedded in the alleged bogus purchases, rather than disallowing the entire purchase amount. Since sales were accepted and purchases correlated, taxing the profit element was deemed justified.

The Tribunal upheld the validity of reopening the assessment and rejected the assessee's claim for cross-examination. While agreeing that the profit element should be taxed, the Tribunal modified the CIT(A)'s decision, sustaining the addition at 12.50% of the alleged bogus purchases.