2019 (12) TMI 449 - AT - Income Tax

Appellate Tribunal affirms 5% disallowance on non-genuine purchases for AY 2010-11.

The Appellate Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to restrict the disallowance to 5% of the non-genuine purchases for ... Bogus purchases - NP @5% of the turnover, as per the provisions of section 44AF - HELD THAT:- None of the findings and observations of the Ld.CIT(A) have been rebutted with evidences by the revenue and thus we do not see any infirmity in the order passed by the Ld.CIT(A) in restricting the disallowance to the extent of 5% of the Net Profit purchases. Grounds raised by the revenue are dismissed. Issues:Appeal against order restricting disallowance to 5% of purchases declared non-genuine by Assessing Officer for A.Y. 2010-11.Analysis:The appeal was filed by the Revenue challenging the order of the Learned Commissioner of Income Tax (Appeals) for the Assessment Year 2010-11, where the disallowance of purchases was restricted to 5% of the declared non-genuine purchases. The assessee, engaged in manufacturing of dyes & chemicals, had its assessment reopened based on information from the Sales Tax Department regarding accommodation entries. The Assessing Officer treated the purchases as non-genuine after inspecting the alleged parties and finding discrepancies. The Assessing Officer added the entire amount of non-genuine purchases to the income of the assessee. On appeal, the Ld.CIT(A) limited the disallowance to 5% of the non-genuine purchases after considering evidence and submissions.During the proceedings, despite notice, the assessee did not appear, and the appeal was heard with the Revenue's representative. The Ld. DR supported the Assessing Officer's order. The Ld.CIT(A) extensively analyzed the matter, considering submissions, decisions of High Courts, and the genuineness of purchases from hawala parties. The Ld.CIT(A) referred to various legal precedents and the obligation of the First Appellate Authority to conduct a thorough inquiry for logical conclusions. The Ld.CIT(A) compared the Net Profit rates and directed the Assessing Officer to tax the income at a higher rate, providing relief to the appellant.Upon review of the Ld.CIT(A)'s order and reasons, the Appellate Tribunal found no fault in the decision. The Tribunal noted that the Revenue did not present evidence to challenge the findings of the Ld.CIT(A). Consequently, the Tribunal upheld the order of the Ld.CIT(A) restricting the disallowance to 5% of the non-genuine purchases. The appeal of the Revenue was dismissed, and the order was pronounced on December 2, 2019.