Case Law Details
Ilesh Amrutlal Gadhia Vs DCIT (ITAT Mumbai)
The issue under consideration is whether the disallowance u/s 69C of entire purchase amount by considering it as bogus is justified in law?
ITAT states that, there could be no sale without actual purchase of goods considering the fact that the assessee was engaged in trading activities. The quantitative details were placed on record. There was one-on-one correlation of purchase and sale. The payment to the suppliers was through banking channels. The confirmation of M/s RTIPL was placed on record. The business model of the assessee, as noted by Ld. CIT(A), would explain the non-existence of stock movement register. The GP rate reflected by the assessee qua other years was not abnormal. Prima-facie, there is no change in the nature of business or business model. However, at the same time, the assessee failed to produce the supplier for confirmation of account. While framing the assessment of M/s RTIPL, the books were rejected and an adhoc estimation of profit was made by revenue authorities. The stated factual matrix, in our considered opinion, would make it a fit case to make estimated additions to account for profit element embedded in these suspicious / unverified purchases to factorize for profit earned by assessee against possible purchase of material in the grey / unorganized market and undue benefit of VAT against such bogus purchases, which Ld.CIT(A) has rightly done so. However, keeping in view the fact that the assessee was dealing in low-margin commodity like iron & steel which attracts lower VAT rate, the estimation of 12.5% with set-off of already declared GP was on higher side. In the said background, the bench directed Ld.AO to restrict the estimation to 0.11% on purchases made from M/s RTIPL. This rate was nothing but the GP rate earned by the assessee on other purchases. Drawing analogy from the same & keeping in view the GP rates reflected by assessee in preceding as well as in succeeding years, ITAT direct Ld. AO to estimate the additions against suspicious / unverified purchases @1% on net basis, without any other benefit. Accordingly, the revenue’s appeal stands dismissed whereas the assessee’s appeal stands partly allowed.
FULL TEXT OF THE ITAT JUDGEMENT
1.1 Aforesaid cross-appeals for Assessment Years [AY] 2009-10 & 201011 contest separate orders of learned first appellate authority on certain common grounds of appeal. The only issue involved in the cross-appeals is estimated additions on account of alleged bogus purchases. Facts are stated to be pari-materia the same in both the years and therefore, adjudication in any one of the years would equally apply to the other year as well.
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