ITAT Mumbai: Partially Allow Appeal, Disallow 12.5% of Purchases

The ITAT Mumbai directed the Assessing Officer to disallow 12.5% of the purchases amounting to Rs. 5,22,057, as the sales made by the assessee were not disputed. The ITAT Mumbai partially allowed the appeal, emphasizing the application of the profit rate to the disputed purchases, concluding the case regarding the disallowance of non-genuine purchases for the assessment year 2010-11 on 13th March 2020.

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Issues: Disallowance of non-genuine purchases

Analysis:
1. The appeal was filed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2010-11.
2. The dispute centered around the disallowance of Rs. 5,22,057 due to non-genuine purchases.
3. Despite multiple notices, the assessee did not appear for the hearing, indicating a lack of interest in pursuing the appeal.
4. The assessee, engaged in trading building material, initially declared a total income of Rs. 2,72,120 for the assessment year.
5. The Assessing Officer reopened the assessment based on information from the Sales Tax Department, suspecting accommodation entries provided by hawala operators.
6. The Assessing Officer questioned the genuineness of purchases amounting to Rs. 13,31,855 from five entities, which the assessee failed to substantiate adequately.
7. Notices to selling dealers returned unserved, and essential documents like delivery challan, lorry receipt, and transportation details were not provided to prove the authenticity of purchases.
8. The Assessing Officer rejected the books of account under section 145(3) of the Income Tax Act, considering the purchases unverifiable.
9. While the Assessing Officer estimated profit on some purchases, he disallowed the entire amount of Rs. 5,22,057 as the assessee could not prove payments for these purchases.
10. The learned Commissioner (Appeals) upheld the disallowance, leading to the appeal before the ITAT Mumbai.

Decision:
1. The ITAT Mumbai directed the Assessing Officer to disallow 12.5% of the purchases amounting to Rs. 5,22,057, as the sales made by the assessee were not disputed.
2. The ITAT Mumbai noted that the Assessing Officer's failure to apply the profit rate to these specific purchases lacked justification, as the sales were not in question.
3. Consequently, the ITAT Mumbai partially allowed the appeal, emphasizing the application of the profit rate to the disputed purchases.
4. The order was pronounced on 13th March 2020, concluding the case regarding the disallowance of non-genuine purchases for the assessment year 2010-11.

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