Appellate Tribunal Limits Disallowance to 12.5% Profit Element

The Appellate Tribunal upheld the decision of the Commissioner (Appeals) to restrict the disallowance to 12.5% of the disputed purchases, considering only the profit element for addition. The Tribunal found no grounds for interference and dismissed the appeal, pronouncing the order on 25/02/2021.

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Issues:
Dispute over partial relief granted for non-genuine purchases in assessment year 2010-11.

Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai involved a dispute regarding the partial relief granted by the Commissioner of Income-tax (Appeals)-48 for the assessment year 2010-11. The appellant, a partnership firm engaged in trading, had filed its return of income declaring &8377; 8,90,258. The assessing officer reopened the assessment under section 147 of the Act based on information that the appellant benefited from bogus purchase bills. The assessing officer questioned purchases amounting to &8377; 12,37,674 from two parties, treating &8377; 10,14,469 as non-genuine and adding it back to the income. The appellant contested this addition, leading to the Commissioner (Appeals) restricting the disallowance to 12.5% of the disputed purchases, reducing the addition to &8377; 1,26,808.

During the appeal hearing, the appellant was absent, and the appeal was disposed of ex parte. The Tribunal considered the assessing officer's disallowance of purchases from one party, noting that while the appellant could not prove the purchases, there was no dispute regarding the corresponding sales. This implied that the appellant may have purchased goods from the grey market, suppressing the profit element. The Tribunal agreed with the Commissioner (Appeals) that only the profit element should be considered for addition. The Tribunal found the 12.5% profit rate estimation by the Commissioner (Appeals) fair and reasonable, leading to the dismissal of the appeal.

In conclusion, the Appellate Tribunal upheld the decision of the Commissioner (Appeals) to restrict the disallowance to 12.5% of the disputed purchases, considering only the profit element for addition. The Tribunal found no grounds for interference and dismissed the appeal, pronouncing the order on 25/02/2021.

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