ACIT Vs Meerut Roller Flour Mills (P) Ltd. (ITAT Delhi)
ITAT Delhi: Bogus Purchases Cannot Be Added in Full – Profit Element @5% Sustained Where Suppliers Untraceable; Revenue Appeal Partly Allowed
The Delhi Bench “F” of the ITAT delivered a consolidated order in ACIT v. Meerut Roller Flour Mills (P) Ltd. (AY 2009-10), partly allowing the Revenue’s appeal and dismissing the assessee’s appeal as infructuous.
The assessee, engaged in manufacturing wheat products, had claimed purchases from two parties aggregating to ₹3.38 crore. During assessment, notices issued under section 133(6) to these suppliers were returned unserved, field enquiries suggested non-existence at the given addresses, and the suppliers had not filed returns of income. On this basis, the AO treated the entire purchases as non-genuine and also made separate additions for inflated purchases and unexplained credits.
The CIT(A) deleted all additions, holding that mere non-service of notices and non-production of suppliers could not justify disallowance of purchases when bills, PAN, banking payments, sales-tax records and utilisation of goods were on record, and that section 68 does not apply to trade credits arising from purchases. The CIT(A), however, directed limited verification with the jurisdictional AO of the suppliers.
On remand from the Allahabad High Court, the Tribunal re-examined the issue and held that entire purchases could not be added to income, even if suppliers were untraceable. Following settled law, the Tribunal held that in such cases only the profit element embedded in the alleged non-genuine purchases can be brought to tax. Considering the facts, GP/NP disclosed by the assessee, and judicial precedents, the Tribunal restricted the addition to 5% of the disputed purchases of ₹3.38 crore.
Accordingly, the Revenue’s appeal was partly allowed by sustaining a 5% estimated profit addition, while rejecting addition of the entire purchase amount. The assessee’s appeal against the consequential order was dismissed as infructuous. The decision reiterates that non-genuine purchase cases warrant estimation of profit, not wholesale disallowance of purchases.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal filed by the Revenue is preferred against the original order dated 28-03-2013 of the Ld. Commissioner of Income –Tax (Appeal) Meerut (in short “the Ld. CIT(A)) relevant to assessment year 2009-10. The Assessee has filed the appeal against the Ld. CIT(A) order dated 8.3.2017.
