2024 (6) TMI 862 - AT - Income Tax

Tribunal Reduces Disallowance on Bogus Purchases to 7.5%, Cites Health Issues and COVID-19 for Delay Condonation.

The Tribunal partially allowed the appeal by reducing the disallowance of bogus purchases to 7.5% of INR 4,26,18,638/-, aligning with prior assessments. ... Condonation of delay in filing appeal - reopening of assessment and reassessment proceedings under Section 147 - disallowance of purchases as accommodation (bogus) entries - onus on assessee to substantiate genuineness of purchases - estimation of suppressed profits on unproved purchases - precedent value of Tribunal's decision in related assessment years - substantial justice over technical delayCondonation of delay in filing appeal - substantial justice over technical delay - Whether the delay of 1255 days in filing the appeal should be condoned - HELD THAT: - The Tribunal examined factual explanations proffered by the appellant relating to illness and subsequent death of the proprietor's father, disruption caused by Covid-19 lockdown and an inadvertent omission by the tax consultant to file the appeal despite documents being handed over. Applying the principle that substantial justice should prevail over technical considerations and following the approach in Collector of Land Acquisition v. Mst. Katiji, the Tribunal held that the delay was neither intentional nor deliberate and that the explanation was sufficient and reasonable. The period from 15/03/2020 to 28/02/2022 (as specified by the Supreme Court in the suo motu petition dealing with limitation during Covid-19) was noted as relevant to reduce effective delay, and on balance of facts the delay was condoned. [Paras 11]Delay of 1255 days in filing the appeal is condoned and the appeal is admitted for adjudication on merits.Disallowance of purchases as accommodation (bogus) entries - onus on assessee to substantiate genuineness of purchases - estimation of suppressed profits on unproved purchases - precedent value of Tribunal's decision in related assessment years - Quantum of disallowance on account of alleged bogus purchases - HELD THAT: - The Tribunal noted that reassessment was initiated on information alleging accommodation entries from specified parties and that the AO had made an addition by treating purchases as bogus. The Tribunal observed that facts for the assessment year under appeal were not different from those in the appellant's other assessment years (2010-11 and 2011-12), in which a co-ordinate Bench of the Tribunal had, after considering industry norms and the fact that sales and inventory declared were accepted, restricted the addition to 7.5% of unproved purchases as representing suppressed profit. In view of identical facts and circumstances and following the Tribunal's earlier reasoned decision, the Tribunal restricted the disallowance in the present assessment year to 7.5% of the alleged bogus purchases aggregating to the amount stated in the assessment. [Paras 12, 13]Disallowance on account of alleged bogus purchases is restricted to 7.5% of such purchases; Ground No.1 is partly allowed and remaining grounds are dismissed.Final Conclusion: The Tribunal condoned the delay of 1255 days in filing the appeal and on merits restricted the disallowance in respect of alleged bogus purchases to 7.5% of such purchases for Assessment Year 2009-10, partly allowing the appeal. Issues Involved:1. Disallowance of purchases amounting to INR 4,26,18,638/- as bogus.2. Condonation of delay in filing the appeal by 1255 days.Summary:Issue 1: Disallowance of Purchases as BogusThe Assessee challenged the order dated 16/10/2019 by the CIT(A), which upheld the disallowance of 100% of purchases amounting to INR 4,26,18,638/-. The CIT(A) based this decision on information from the sales tax department and DGIT (Investigation) indicating that the Assessee had accepted bogus accommodation entries. The Assessee argued that the disallowance was based on presumptions without any conclusive findings or adverse material on record and that the sales reported were not doubted. The CIT(A) enhanced the addition from 15% to 100% of the alleged bogus purchases. The Tribunal noted that in the Assessee's cases for Assessment Years 2010-11 and 2011-12, the disallowance was restricted to 7.5% of the bogus purchases. Therefore, following the same reasoning, the Tribunal restricted the disallowance to 7.5% of the bogus purchases for the Assessment Year 2009-10.Issue 2: Condonation of DelayThe appeal was delayed by 1255 days. The Assessee attributed the delay to multiple factors, including the ill health and subsequent death of his father, the Covid-19 pandemic, and minor medical issues faced by the Assessee. The Tribunal considered these reasons sufficient and reasonable, emphasizing that substantial justice should prevail over technical considerations. Citing the Supreme Court's stance in Collector of Land Acquisition Vs. Mst. Katiji & others, the Tribunal condoned the delay and proceeded to decide the appeal on merits.Conclusion:The Tribunal allowed the appeal partly by restricting the disallowance on account of bogus purchases to 7.5% of the total purchases amounting to INR 4,26,18,638/-, while dismissing all other grounds raised by the Assessee.