Tribunal affirms Commissioner's decision on disallowed purchases, citing lack of evidence

The Tribunal upheld the Commissioner's decision to limit the addition to 12.5% in a case involving disallowance of non-genuine purchases made by the assessee. The Tribunal found that the assessee failed to provide sufficient evidence to prove the genuineness of the purchases, leading to doubts regarding the legitimacy of the transactions. As a result, the Tribunal dismissed all grounds raised in the appeals and affirmed the Commissioner's decision, ultimately dismissing the appeals on 28/01/2021.

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Issues:
Challenge to common order by Revenue for assessment years 2009-10, 2010-11, and 2011-12. Disallowance of non-genuine purchases.

Analysis:
The appeals were filed by the Revenue challenging a common order passed by the Commissioner of Income Tax (Appeals) for the mentioned assessment years. The main dispute in all appeals pertained to the disallowance of non-genuine purchases made by the assessee. The assessee, engaged in trading, filed returns of income for the respective years. The Assessing Officer reopened assessments based on information from the Sales Tax Department indicating non-genuine purchases. The AO asked the assessee to prove the genuineness of these purchases, but the evidence provided was deemed unsatisfactory. Consequently, the AO treated the purchases as non-genuine and estimated profits at 25%, leading to additions in the assessments. The assessee contested these additions before the Commissioner (Appeals), who reduced the additions to 12.5%.

Upon review, the Tribunal noted specific information from the Sales Tax Department identifying selling dealers as hawala operators, casting doubt on the genuineness of the purchases. The assessee failed to provide complete documentary evidence to support the purchases, and notices to selling dealers went unserved. While the assessee had corresponding sales, the source of purchases remained questionable. The AO estimated profit on non-genuine purchases at 25%, later reduced to 12.5% by the Commissioner (Appeals). The Tribunal found no issue with this decision, as the assessee likely sourced goods from unverified or grey market channels, impacting the true profit. Considering the business nature and profit rates in similar cases, the Tribunal upheld the Commissioner's decision to limit the addition to 12.5%.

In conclusion, the Tribunal dismissed all grounds raised in the appeals, affirming the Commissioner's decision. The appeals were consequently dismissed, and the order was pronounced on 28/01/2021.

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