Tribunal affirms disallowance of alleged bogus purchases, upholds 12.5% profit estimate.

The Tribunal upheld the decision to sustain the disallowance on alleged bogus purchases, estimating a 12.5% profit element. Despite the assessee's failure to prove the legitimacy of purchases from suppliers deemed bogus, the Tribunal found the profit percentage reasonable based on industry standards and dismissed the appeal.

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Issues Involved:
Whether the Commissioner of Income Tax (Appeals) was justified in sustaining the disallowance made on alleged bogus purchases.

Analysis:
The appeal in ITA No.2519/Mum/2019 for A.Y.2013-14 was against the order by the ld. Commissioner of Income Tax (Appeals)-18, Mumbai regarding the disallowance made on alleged bogus purchases. The assessee did not appear during the proceedings, leading to the Tribunal proceeding to dispose of the appeal based on the merits presented by the Revenue. The assessee, engaged in trading fabrics, declared total income for the year but faced scrutiny due to purchases from certain suppliers which were deemed bogus.

The ld. AO found that the purchases from four specific parties were questionable and sought to verify their authenticity. Despite the assessee providing various documents and explanations, including delivery challans and financial statements, the suppliers could not be produced before the authorities. The ld. AO estimated a 12.5% profit element on the alleged bogus purchases, resulting in a disallowance.

The ld. CIT(A) upheld the disallowance, noting that the suppliers were found to be bogus, as evidenced by the non-production of parties and their inclusion in the list of tainted hawala dealers. The ld. CIT(A) concluded that the profit percentage estimated by the ld. AO was reasonable, considering the circumstances and upheld the action.

The Tribunal found that the assessee failed to substantiate its claim that the purchases were not subject to MVAT/Sales Tax. Despite the consumption/sales not being doubted, the Tribunal decided to tax only the profit element from the disputed purchases. The non-service of notices to the alleged suppliers indicated their non-existence, shifting the burden on the assessee to prove the legitimacy of the purchases. The Tribunal agreed with the profit percentage estimation of 12.5% by the ld. CIT(A) based on industry standards and previous judgments, ultimately dismissing the appeal.

In conclusion, the Tribunal dismissed the appeal, upholding the decision to sustain the disallowance made on the alleged bogus purchases, based on the profit element estimated at 12.5% in the peculiar circumstances of the case.

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