If the gross profit already shown is more than 12.5%, no disallowance is required on account of Bogus purchases

Last updated: 22 January 2021

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This Income Tax Appellate Tribunal ruling states that if a company's gross profit already exceeds 12.5%, no disallowance for bogus purchases is necessary. The case involved an assessee who was accused of making bogus purchases, leading to an addition by the Assessing Officer and confirmation by the CIT(A). However, the tribunal's decision hinges on the profit margin.

Court :
ITAT Mumbai

Brief :
This appeal by the assessee wherein the assessee is aggrieved that the learned Commissioner of Income Tax (Appeals)-3, Mumbai (‘ld.CIT(A) for short) dated01.11.2018 has erred in sustaining 25% disallowance on account of bogus purchase for the assessment year (A.Y.) 2010-11.

Citation :
ITA No. 736/Mum/2019

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC-II” BENCH, MUMBAI

BEFORE SHRI SHAMIM YAHYA, AM

ITA No. 736/Mum/2019
(Assessment Year: 2010-11)

M/s. D. C. Engineers Private Limited
Plot No. 36, Survey No.66-1/2,
Naikpada, Waliv, Opp. Rapid Pack,
Vasai (E) – 401 208
PAN/GIR No. AABCD 1670 R
(Appellant

Vs.

ITO, Ward – 4(1),
Thane
Respondent

Appellant by : None
Respondent by : Shri Kailash Gaikwad

Date of Hearing : 14.10.2020
Date of Pronouncement : 01.01.2021

O R D E R

Per Shamim Yahya, A. M.:

This appeal by the assessee wherein the assessee is aggrieved that the learned Commissioner of Income Tax (Appeals)-3, Mumbai (‘ld.CIT(A) for short) dated01.11.2018 has erred in sustaining 25% disallowance on account of bogus purchase for the assessment year (A.Y.) 2010-11.

2. Brief facts of the case are that the assessee is engaged in the business of manufacturing of engineering goods. Information was received from the Sales Tax Department that the assessee is engaged in making bogus purchases of Rs.62,25,917/- from two parties. The assessment was accordingly reopened.

3. The Assessing Officer (‘A.O.’ for short) in this case has made 25% addition on account of bogus purchase amounting to Rs.15,56,480/-.

4. Upon the assessee’s appeal, the ld. CIT(A) confirmed the same.

To know more in details find the attachment file