ITO Vs Sundha Steels Pvt. Ltd. (ITAT Mumbai)
ITAT Mumbai: Bogus Purchases – Only 0.2% Profit Addition Sustainable, Consistency Prevails
In this case, the ITAT Mumbai upheld the CIT(A)’s action of restricting addition on alleged bogus purchases (₹27.5 crore) to only 0.2% of the purchase value, rejecting the Revenue’s attempt to apply a higher GP rate of 1.23%.
The Tribunal noted that:
- In the assessee’s own earlier and subsequent years, identical issue had been decided by ITAT by restricting addition to 0.2% (profit element)
- Such decisions had attained finality, as Revenue’s appeals were dismissed by the High Court
- Books were not rejected and quantitative details were not disputed, hence full disallowance or higher GP estimation was unjustified
Applying the rule of consistency and judicial discipline, the Tribunal held that the same rate must be followed in the current year as well.
The Tribunal also acknowledged that the case falls under CBDT Circular No. 5/2024 exception (organized tax evasion cases), making the appeal maintainable despite monetary limits-but still ruled against Revenue on merits.
Final Outcome:
- Addition restricted to 0.2% of bogus purchases (₹5.5 lakh approx.)
- Revenue’s appeal dismissed on merits
- Principle reaffirmed: only profit element-not entire purchase-can be taxed
This ruling strengthens a key position: in bogus purchase cases, estimation must be reasonable and consistent-arbitrary GP additions won’t survive.
