DCIT Vs Remi Sales And Engineering Limited (ITAT Mumbai)
Mumbai ITAT upheld the CIT(A)’s order restricting addition on alleged bogus purchases to 15%, rejecting the Assessing Officer’s action of 100% disallowance u/s 69C.
The Tribunal observed:
- The AO made addition solely based on Sales Tax Department information, without:
- Providing such material to the assessee
- Conducting independent enquiry
- The assessee had furnished complete documentary evidence, including:
- Purchase invoices
- Goods receipt records
- Bank payments through account payee cheques
- Stock registers and quantitative details
- Corresponding sales invoices
Crucially:
- The sales were accepted by the department, which implies that:
- Purchases cannot be entirely bogus
- At best, there could be inflation or grey market sourcing
The ITAT held:
- Section 69C cannot be invoked for entire purchases when expenditure is recorded and explained
- Only profit element embedded in such purchases can be taxed
- Estimation of 15% by CIT(A) is reasonable and in line with settled law
Accordingly:
- Revenue’s appeal was dismissed
- Addition restricted to 15% sustained
The ruling reinforces a settled principle: “When sales are accepted, purchases cannot be fully disallowed-only profit element can be taxed
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal has been preferred by the Revenue assailing the impugned order dated 21.10.2025 passed by the learned Addl./JCIT(A)-7, Kolkata, arising out of the assessment framed under section 143(3) read with section 147 of the Income Tax Act, 1961 for the assessment year 2011–12.
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