Shah Traders Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that the addition in respect of bogus purchases is to be limited to the extent of bringing the gross profit rate on such purchases at the same rate as of other genuine purchases. Accordingly, matter restored to file of AO with direction to restrict addition.
Facts- Reassessment proceedings under section 148 of the Income Tax Act were initiated against the assessee on the basis that the assessee has obtained accommodation entry of bogus purchases from M/s Swastik Corporation. AO vide order dated 27/05/2023 passed under section 147 read with section 144B of the Act disagreed with the submissions of the assessee and made an addition of INR 3,62,45,000 under section 69C read with section 115BBE of the Act.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that in the present case, the AO only doubted the purchases from M/s Swastik Corporation in the absence of documentary evidence and the entire sales are not in dispute. Even before us, no such details as mentioned above are available on record. Therefore, from the material available on record it is evident that the assessee has failed to prove the genuineness of the aforenoted two purchases made from M/s Swastik Corporation. Thus, it appears to be a case of bogus bills arranged from the aforesaid entities and materials purchased from somewhere else at a lower cost. Thus, we are of the considered view that a reasonable disallowance of the purchases would meet the possibility of revenue leakage.
