Balajee Loha Private Limited Vs ACIT (ITAT Raipur)
The Income Tax Appellate Tribunal (ITAT), Raipur, dismissed the assessee’s appeal for Assessment Year 2018-19 and upheld the order of the Commissioner of Income Tax (Appeals) [CIT(A)] sustaining a disallowance of 12.5% of purchases treated as bogus.
The assessee, engaged in the business of manufacturing and trading steel products, filed its return of income declaring income of Rs.7,13,26,490. The return was initially processed under Section 143(1), wherein employees’ contribution to PF and ESIC paid beyond the prescribed due dates was disallowed. Subsequently, the assessment was reopened under Section 148 on the basis of information that the assessee had allegedly made bogus purchases of Rs.44,92,645 from M/s Mideast Integrated Steels Limited. During the reassessment proceedings, the Assessing Officer (AO) called upon the assessee to establish the genuineness of these purchases.
The assessee furnished a reply, but the AO found it unsatisfactory. The AO noted that the supplier had not complied with the notice issued under Section 133(6), the assessee had not furnished input-output analysis demonstrating consumption of raw material, GSTR-2A, delivery acknowledgements, transport details, signed purchase bills or evidence of physical movement of goods. The AO also relied upon information received from the Investigation Wing stating that the supplier was engaged in paper transactions without actual movement of goods. Referring to the Supreme Court’s observations in State of Karnataka v. Ecom Gill Coffee Trading Pvt. Ltd., the AO held that invoices and cheque payments alone were insufficient to establish genuine movement of goods and disallowed 25% of the purchases under Section 37(1), treating it as the estimated profit from fictitious purchases.
