D.G. Exports Vs DCIT (ITAT Mumbai)
The Mumbai Bench of the ITAT dealt with an appeal arising from a reassessment where the Assessing Officer had treated entire purchases of ₹4.06 crore from entities linked to the Bhanwarlal Jain Group as bogus and added the full amount to income under section 147 read with section 143(3). The CIT(A), NFAC upheld the addition in toto, relying on Investigation Wing inputs that the supplier entities were accommodation entry providers.
Before the Tribunal, the assessee demonstrated that the corresponding sales were fully accepted, stock registers were maintained, and no defect was found in quantitative records. Crucially, it was pointed out that in the assessee’s own case for AYs 2010-11 and 2013-14, involving the very same parties and identical facts, the Assessing Officer himself had restricted the disallowance to 3% of the purchase value, taxing only the profit element embedded in such purchases.
The ITAT held that, in the absence of any adverse finding on stock or sales, addition of the entire purchase amount is illogical and disproportionate. Applying the principle of consistency, and noting that the Revenue could not justify deviation from its own stand taken in earlier years, the Tribunal directed the AO to restrict the addition to 3% of the alleged bogus purchases and delete the balance.
Accordingly, the assessee’s appeal was partly allowed, and the addition was confined only to the gross profit element embedded in the purchases.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
