ITAT sets aside bogus purchases order, directs 12.5% income estimation on unapproved purchases following precedents

ITAT Mumbai set aside CIT(A)'s order regarding bogus purchases and directed AO to estimate income at 12.5% on unapproved purchases, following jurisdictional HC precedents. The tribunal also remitted the Section 80IC deduction claim back to AO for fresh examination, citing inadequate substantiation by assessee and lack of convincing evidence during proceedings. The appeal was partly allowed for statistical purposes, with both issues requiring fresh adjudication by AO on merits.

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Issues Involved:
The issues involved in this judgment include the disallowance of alleged purchase from a havala dealer and the denial of claim of deduction under section 80-IC of the Income Tax Act 1961.

Disallowed Purchase from Havala Dealer:
The assessee filed an appeal against the order confirming the disallowance of Rs. 7,69,600 for alleged purchase from a havala dealer. The Assessing Officer (AO) found that the assessee obtained bogus purchase bills, leading to the disallowance. Despite the assessee's submissions, the AO was not satisfied with the explanations provided, resulting in the disallowance. The AO's decision was upheld by the CIT(A) and subsequently by the Tribunal. However, the Tribunal directed the AO to estimate the income at 12.5% on unapproved/bogus purchases, partly allowing this ground of appeal.

Denial of Claim of Deduction under Section 80-IC:
The second issue pertained to the denial of the claim of deduction under section 80-IC of the Act. The assessee contended that the denial was a mere change of opinion by the AO, as the claim had been allowed in previous assessments. The AO had called for details and allowed the claim in the original assessment order. The Tribunal found that the denial of the claim was not tenable and directed the AO to examine and adjudicate afresh on merits, providing the assessee with an opportunity to substantiate the case with evidence and information. The Tribunal allowed this ground of appeal for statistical purposes.

Conclusion:
In conclusion, the appeal filed by the assessee was partly allowed for statistical purposes. The Tribunal set aside the order of the CIT(A) on both disputed issues and provided directions to the AO for re-examination and fresh adjudication based on the facts presented in the case.

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