ITAT allows partial relief in assessee's appeals on bogus purchases, directs recompute book profits.

The ITAT partially allowed the assessee's appeals for AY 2009-10 and AY 2011-12 regarding the disallowance of bogus purchases. The Tribunal restricted the disallowance to 12.5% of the alleged bogus purchases in both years, amounting to Rs. 4,89,774 for AY 2009-10 and Rs. 3,38,222 for AY 2011-12. The ITAT found that despite lack of physical delivery evidence, the assessee had invoices, made payments through banking channels, and had quantitative details available, leading to the partial allowance of the appeals. The AO was directed to recompute Book Profits u/s 115JB and adjust business losses accordingly.

---

---

Issues:
Assessment of bogus purchases for AY 2009-10 and AY 2011-12.

Analysis:
For AY 2009-10, the assessee contested the addition of bogus purchases amounting to Rs. 39,18,195 before the Ld. CIT(A) but was unsuccessful. The AO treated the purchases as bogus due to lack of physical delivery evidence. The AR argued that as the sales turnover was not doubted, the purchases should not be considered bogus. The ITAT found that the assessee had invoices, made payments through banking channels, and had quantitative details available. The Tribunal held that full disallowance was not justified and restricted it to 12.5% of the alleged bogus purchases, amounting to Rs. 4,89,774, allowing the appeal partly.

For AY 2011-12, a similar disallowance of Rs. 27,05,774 was made for bogus purchases, which was confirmed by the Ld. CIT(A). The ITAT applied the same principle as in the previous year and restricted the disallowance to 12.5% of the amount, i.e., Rs. 3,38,222, partially allowing the appeal. The AO was directed to recompute Book Profits u/s 115JB and adjust any business losses accordingly. In conclusion, both appeals by the assessee were partly allowed by the ITAT.

---