ITO-19(3)(1) Vs Salem Steel Industries (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has dismissed an appeal by the Revenue Department, upholding the Commissioner of Income Tax (Appeals) [CIT(A)] decision to restrict the disallowance for ‘bogus purchases’ to 25% of the total amount. The case centered on transactions made by a firm from two parties, M/s. Shree Sundha Steels Pvt. Ltd. and M/s. Metalex Tube Industries, which the Investigation Wing had identified as fictitious concerns providing only accommodation entries.
The Core Issue: Fictitious Bills, Real Material
The Assessing Officer (AO) had initially received information from the Directorate General of Income Tax (Investigation) that the assessee was a beneficiary of accommodation entries provided by the Bhawarlal Jain Syndicate, which specializes in issuing bogus bills without supplying goods. Consequently, the AO treated the entire amount of purchases, totaling ₹37,35,984, as non-genuine and made a 100% addition to the firm’s income under Section 69C of the Income Tax Act, 1961 (IT Act).
The assessee appealed the decision. While the CIT(A) confirmed a separate addition for unsecured loans, it provided partial relief regarding the bogus purchases. The CIT(A) noted that while the assessee failed to prove the genuineness of the purchases from the stated parties, the receipt of the material itself was not disputed by the AO. The material was supported by the firm’s registers and books of account, and the resulting sales were not questioned.
