Pancham Jewellers Private Limited Vs DCIT (ITAT Chandigarh)
ITAT Taxes Only 10% Profit on Bogus Purchase Bills, Deletes Section 40A(3) Disallowance
The Income Tax Appellate Tribunal (ITAT), Chandigarh, partly allowed the assessee’s appeal for Assessment Year 2014-15 against the order of the Commissioner of Income Tax (Appeals), which had confirmed three additions/disallowances of ₹13,95,927, ₹1,34,630, and ₹1,09,200 arising from an assessment framed under Section 143(3) of the Income-tax Act.
The first issue concerned the disallowance of purchases amounting to ₹13,95,927 made from M/s Nazar Impex Pvt. Ltd. The Assessing Officer treated the supplier as an accommodation entry provider based on investigation findings and disallowed the purchases. The assessee contended that the purchases were genuine, payments were made through banking channels, account confirmation had been furnished, and the goods were actually used in manufacturing activities. The Tribunal noted that the appeal of M/s Nazar Impex Pvt. Ltd. for the same assessment year had been decided by the Surat Bench of the Tribunal, which had confirmed estimated commission income for that entity in respect of local sales, supporting the Assessing Officer’s allegation. However, the Tribunal also observed that the assessee possessed relevant supporting documents, the purchases formed part of the quantitative records, the books of account were duly audited and had not been rejected, and there was no dispute regarding sales turnover or opening and closing stock. On these facts, the Tribunal concluded that the assessee had procured actual goods from the grey market while obtaining supporting bills from the said entity. Holding that only the profit element required taxation, the Tribunal estimated the addition at 10% of the purchases and directed the Assessing Officer to restrict the addition to ₹1,39,593. The grounds relating to this issue were partly allowed.
