Tribunal limits disallowance to 12.5% for bogus purchases, denies deduction under section 80IB(10)

The Tribunal partially allowed the appeal by restricting the disallowance to 12.5% of the bogus purchases and dismissing the deduction claim under section 80IB(10) due to the nature of the purchases. The decision was based on the principle that only the profit element from such transactions should be added to the assessee's income, following established legal precedents.

---

---

Issues involved:
Appeal against addition of purchases as bogus/non-genuine, disallowance of deduction u/s 80IB(10).

Analysis:
1. The appeal was filed against the order of the Commissioner of Income Tax (Appeals) confirming the addition of purchases as bogus/non-genuine. The Assessing Officer (AO) found that the assessee made purchases from hawala dealers issuing bogus bills. Despite furnishing sample bills and details, notices to parties were returned, and one party denied any transaction. The AO, based on Sales Tax Department information, made an addition of Rs. 1,38,01,084.

2. The Commissioner upheld the AO's decision due to lack of primary evidence on purchase genuineness. The Appellate Tribunal noted the assessee's failure to provide supporting documents. Citing precedents, the Tribunal ruled that only the profit element from such purchases can be added to income, not the entire purchase price. Thus, the disallowance was restricted to 12.5% of the bogus purchases, partly allowing the appeal.

3. The second ground of appeal regarding deduction u/s 80IB(10) was dismissed as the purchases were deemed bogus. The Tribunal emphasized that the question of deduction did not arise in such cases. The appeal was partly allowed, with the disallowance restricted and the deduction claim dismissed.

In conclusion, the Tribunal partially allowed the appeal by restricting the disallowance to 12.5% of the bogus purchases and dismissing the deduction claim under section 80IB(10) due to the nature of the purchases. The decision was based on the principle that only the profit element from such transactions should be added to the assessee's income, following established legal precedents.

---