Mahendrakumar Danmal Mutha Vs ITO (ITAT Mumbai)
The Tribunal first condoned a delay of 356 days in filing appeal, accepting the assessee’s explanation that the CIT(A) order was missed due to delivery into spam folder and that he acted promptly upon discovering it. On merits, the AO had treated purchases of ₹34.08 lakh from certain parties listed as hawala dealers as non-genuine and disallowed commission expenses of ₹14.18 lakh. The CIT(A) confirmed both additions.
ITAT observed that the assessee maintained quantitative records, sales were accepted, books were not rejected and payments were made through banking channels. In such circumstances, entire purchases could not be disallowed merely due to non-traceability of suppliers or Sales Tax information. Following settled principles, the Tribunal held that only profit element embedded in doubtful purchases could be taxed and directed restriction of addition to 6.5% of purchases from two parties, deleting the balance.
Regarding commission expenses, ITAT noted that the assessee furnished ledger accounts, brokerage bills, PAN details, bank payments and TDS records, and no evidence was brought by Revenue to prove payments were bogus or returned in cash. Since expenditure was part of normal business activity and supported by primary evidence, the entire disallowance of ₹14.18 lakh was deleted. The appeal was partly allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
