Appeal partly allowed, directs 12% disallowance. Delay condoned. Order date 04/11/2019.

The Tribunal partly allowed the appeal, directing the Assessing Officer to restrict the disallowance on account of alleged bogus purchases to 12% of the total disputed purchases. The delay in filing the appeal was condoned due to valid reasons. The order was pronounced on 04/11/2019.

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Issues Involved:
1. Rejection of books of account under section 145(3) of the Income Tax Act.
2. Disallowance of alleged bogus purchases.
3. Suppression of profit by booking hawala purchases.
4. Quantum of suppressed profit and its calculation.
5. Condonation of delay in filing the appeal.

Detailed Analysis:

1. Rejection of Books of Account:
The appellant contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in rejecting the books of account under section 145(3) of the Income Tax Act, 1961, despite no defects being pointed out. The appellant had submitted detailed information and the Form 3CD Audit Tax Report. However, this ground was not argued by the appellant’s representative and was thus treated as not pressed and dismissed.

2. Disallowance of Alleged Bogus Purchases:
The case was reopened under section 147 based on information from the Sales Tax Department, Government of Maharashtra, indicating that certain hawala operators were providing accommodation bills without actual delivery of goods. The appellant was listed as a beneficiary, having allegedly made purchases from hawala dealers amounting to Rs. 9,68,691/-. The Assessing Officer (AO) disallowed the entire purchase amount from three parties, namely M/s Shreeji Commercial Corporation, M/s Swastik Enterprises, and M/s Pawan Enterprises, citing insufficient supporting documents like transportation bills, delivery challans, goods receiving notes, and octroi receipts.

3. Suppression of Profit by Booking Hawala Purchases:
The CIT(A) found that the appellant had suppressed profit by booking hawala purchases and restricted the disallowance to 25% of the disputed purchases, amounting to Rs. 2,42,173/-. However, since this disallowance was less than the suppressed Gross Profit (GP), the CIT(A) restricted the disallowance to Rs. 6,15,013/-, granting relief of Rs. 3,53,948/-.

4. Quantum of Suppressed Profit and Its Calculation:
The appellant argued that the disallowance sustained by the CIT(A) was excessive and that the purchases were duly supported by ledger accounts, purchase invoices, delivery challans, and payments made through banking channels. The appellant also highlighted the GP ratios for the assessment years 2007-08 to 2011-12, emphasizing that the GP ratio for the year under consideration (AY 2009-10) was 4.73%. The Tribunal noted that only the real income can be taxed and that the disallowance should be restricted to a reasonable percentage of the disputed purchases. Citing the Bombay High Court’s decision in CIT Vs Hariram Bhambhani, the Tribunal restricted the disallowance to 12% of the total disputed purchases.

5. Condonation of Delay in Filing the Appeal:
The appellant sought condonation of a 13-day delay in filing the appeal, citing religious observances and pilgrimage as reasons. The Tribunal accepted the explanation, noting the delay was neither intentional nor deliberate, and condoned the delay.

Conclusion:
The Tribunal partly allowed the appeal, directing the AO to restrict the disallowance on account of bogus purchases to 12% of the total disputed purchases. The order was pronounced in the open court on 04/11/2019.

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