Karamtara Engineering Limited Vs DCIT (ITAT Mumbai)
Bogus Purchase Addition Restricted to 5% – Sales Accepted & Banking Trail Proven – Full Disallowance Not Sustainable – ITAT Mumbai
AO treated purchases as bogus based on Sales Tax Dept information, non-service of notices u/s 133(6) and non-compliance of summons, and made 100% addition. CIT(A) restricted addition to 5% in some AYs while dispute continued for other years. Assessee demonstrated ledger accounts, invoices, delivery challans, goods inward notes and banking payments; sales were accepted and books were not rejected.
ITAT held that where sales are not doubted and payments are through banking channel, entire purchase cannot be disallowed even if suppliers are accommodation entry providers. Only profit element embedded in such purchases can be estimated. Following consistency with assessee’s own earlier years, Tribunal restricted addition to 5% of alleged purchases and directed AO to verify exclusion of Manav Impex transactions before applying rate. Assessee appeal partly allowed and Revenue appeals dismissed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These cross appeals have been filed by the assessee as well as by the Revenue against the orders passed by the learned Commissioner of Income Tax (Appeals)-50, Mumbai, being order dated 26/09/2025 and 24/07/2024, arising out of the quantum assessments framed under section 143(3) (and in the case of A.Y. 2009-10, arising in the reassessment/remand framework) for Assessment Years 2009-10, 2012-13, 2015-16 and 2016-17. Since the controversy in all the years emanates from the same common substratum, namely, purchases treated as unverifiable/non-genuine/bogus on the basis of information from Sales Tax Department and the consequential estimation of profit element thereon, and further, as the parties before us have proceeded on the footing that the issue involved is common and covered by the Tribunal’s decision in assessee’s own case for earlier years, these appeals were heard together and are being disposed of by this consolidated order.
