Case Law Details
Sangeeta Metal (India) Vs ACIT (ITAT Mumbai)
Introduction: The case of Sangeeta Metal (India) vs ACIT unfolds with the Hon’ble ITAT Mumbai adjudicating on the issue of bogus purchases. Notably, the tribunal cites precedent and rules against a 100% disallowance, emphasizing the need for a nuanced approach based on the gross profit rate.
Detailed Analysis: The crux of the matter lies in the reassessment under section 147, where the Assessing Officer added Rs.22,00,556/- due to a possible profit element of 12.5% on alleged bogus purchases. The assessee, challenging the decision, argued that only the profit from these purchases should be taxed, not the entire amount. The case draws parallels from an earlier decision by the ITAT Mumbai in the assessee’s favor for the A.Y. 2010-11.
Conclusion: In a significant legal victory, the ITAT Mumbai directs the Assessing Officer to restrict the addition on the gross profit rate of bogus purchases to match genuine purchases. This ruling, echoing a similar stance by the jurisdictional High Court, sets a precedent for cases where sales are not in doubt. The tribunal deems the initiation of penalty premature and holds that interest under sections 234B and 234C is consequential. As a result, the appeal by Sangeeta Metal stands partly allowed.
We find that the Hon’ble ITAT, “SMC” Bench in ITA No.3273/Mum/2018 have dealt with similar issue, more so particularly, in assessee’s own case and had ruled that when sales are not in doubt, then 100% disallowance for bogus purchases cannot be made and relied on Hon’ble jurisdictional High Court in Nikunj Eximp Enterprises Pvt Ltd 372 ITR 619 (Bom) and Principal Commissioner of Income-tax vs M. Haji Adam & Co Income Tax Appeal No.1004 of 2016 dated 11/2/2019. We find it essential to cull out the relevant extract from the said order for ready reference as stated below:-
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