ITAT decision: 25% disallowance upheld, reduced to 12.5% on appeal. Cross objection dismissed.

The ITAT dismissed the Revenue's appeal seeking 100% disallowance of bogus purchases, upholding the ld. Commissioner's decision to restrict the disallowance to 25%. The ITAT found the assessing officer had credible information on accommodation entry providers for bogus bills, and the assessee failed to provide evidence or produce parties for examination. In the assessee's appeal, the ITAT reduced the disallowance to 12.5%, considering the lack of confirmation from hawala parties. The cross objection regarding cross-examination of hawala dealers was dismissed. The judgment was pronounced on 22.03.2018.

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Issues:
1. Revenue's appeal: 100% disallowance of bogus purchase
2. Assessee's appeal: 25% disallowance of bogus purchase
3. Cross objection: Opportunity to cross examine hawala dealers

Revenue's Appeal - 100% Disallowance:
In the Revenue's appeal, the concern was the ld. Commissioner of Income Tax (Appeals) not sustaining 100% disallowance of bogus purchase by the assessing officer. The assessing officer disallowed the entire hawala purchases amounting to Rs. 1,78,56,471 as the assessee failed to provide confirmation, corroborative evidence, or produce the hawala parties for examination. The ld. Commissioner of Income Tax (Appeals) restricted the addition to 25% of the bogus purchase. The ITAT Mumbai found that the assessing officer had credible information about accommodation entry providers being used for bogus bills. The assessee could not provide any confirmation from the parties, evidence of transportation of goods, or produce the parties for examination. The ITAT concluded that the purchases from these non-existent parties could not be considered genuine, citing the Supreme Court decisions in the cases of Sumati Dayal and Durga Prasad More.

Assessee's Appeal - 25% Disallowance:
In the assessee's appeal, the issue was the ld. Commissioner of Income Tax (Appeals) sustaining a 25% disallowance of the bogus purchase. The ITAT observed that the assessee failed to provide any confirmation from the hawala parties or produce them for examination. The ITAT emphasized that the sales tax department found these parties to be providing bogus accommodation entries, and notices sent to them were returned unserved. The ITAT also referred to the Hon'ble Gujarat High Court decision in the case of N K Industries vs Dy CIT, where 100% disallowance of bogus purchases was upheld. Ultimately, the ITAT held that a 12.5% disallowance of the bogus purchase would meet the ends of justice in this case, which the assessee's counsel agreed to.

Cross Objection - Opportunity to Cross Examine:
The cross objection raised the issue that the ld. Commissioner of Income Tax (Appeals) did not appreciate the lack of opportunity for the assessee to cross-examine the hawala dealers. The ITAT noted the delay in filing the appeal by the assessee due to a partner's illness. After considering both counsels and the records, the ITAT condoned the delay. The ITAT further highlighted that the assessee's plea for an opportunity to cross-examine the parties from whom bogus bills were obtained was deemed unsustainable given the overwhelming evidence against the genuineness of the purchases.

In conclusion, the ITAT dismissed the Revenue's appeal and the assessee's cross objection while partly allowing the assessee's appeal by restricting the disallowance to 12.5% of the bogus purchase. The judgment was pronounced on 22.03.2018.

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