Ketan Gokuldas Badiani Vs ITO (ITAT Mumbai)
Mumbai ITAT: In Bogus Purchase Cases, Addition Restricted to Gross Profit Element; 917-Day Delay Condoned
The Mumbai ITAT condoned a 917-day delay in filing the appeal after accepting the assessee’s explanation that the CIT(A)’s order had not come to his knowledge due to the auction of his residence under the SARFAESI Act, and that he discovered the order only upon checking the income-tax e-filing portal following an email regarding outstanding demand. On merits, the Tribunal found that the issue of bogus purchases had already been decided in the assessee’s own case for an earlier assessment year. Following its earlier order and the Bombay High Court’s decision in PCIT v. M. Haji Adam & Co., the Tribunal reiterated that where sales are accepted as genuine, the entire alleged bogus purchases cannot be disallowed. Instead, the addition should be restricted to the profit element embedded in such purchases by applying the same gross profit rate as that earned on genuine purchases. The matter was accordingly restored to the Assessing Officer for recomputation after granting the assessee an opportunity of hearing, and the appeal was partly allowed.
Cases Discussed
- Principal Commissioner of income tax vs. M Haji Adam & Co. (Bombay High Court), ITA number 1004 of 2016 dated 11/2/2019
- Nikunj Eximp Enterprises (Bombay High Court), writ petition no 2860, order dt 18.6.2014
FULL TEXT OF THE ORDER OF ITAT MUMBAI
