Repercussions if there is failure to substantiate the purchase of import license by the assessee

Last updated: 27 May 2021

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Quick Summary

This Income Tax Appellate Tribunal case concerns an assessee who purchased an import licence for Rs. 2.66 Lacs from a supplier later deemed bogus. Despite providing a purchase bill, bank statements, and proof of licence utilisation, the Assessing Officer disallowed the expense. The Tribunal noted that the assessee failed to discharge the onus of substantiating the purchase from the specific supplier, leading to the disallowance.

Court :
ITAT Mumbai

Brief :
Aforesaid appeal by revenue for Assessment year [AY in short] 2011-12 contest the order of Ld. Commissioner of Income Tax (Appeals)-18, Mumbai [in short CIT(A) ] dated 26/08/2019 which has provided certain relief to the assessee on account of alleged bogus purchases.

Citation :
I.T.A. No.7141/Mum/2019

IN THE INCOME TAX APPELLATE TRIBUNAL
“H” BENCH, MUMBAI

BEFORE HON’BLE SHRI MAHAVIR SINGH, VP AND
HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(Hearing Through Video Conferencing Mode)

I.T.A. No.7141/Mum/2019
Assessment Year: 2011-12)

DCIT-11(1)(2)
R.No.1, GF
Aaykar Bhawan, M.K.Road
Mumbai – 400 020
PAN/GIR No. AAFCS-2340-R
Appellant)

Vs.

M/s Shahastraa Exports P. Ltd.
6th Floor, Navkar Plaza
Bajaj Road, Vile Parle (W)
Mumbai – 400 056
Respondent)

Assessee by : Shri Dinesh Agarwal – Ld. AR
Revenue by : Shri Gurbinder Singh-Ld. DR

Date of Hearing : 21/04/2021
Date of Pronouncement : 03/05/2021

O R D E R

Manoj Kumar Aggarwal (Accountant Member)

1. Aforesaid appeal by revenue for Assessment year [AY in short] 2011-12 contest the order of Ld. Commissioner of Income Tax (Appeals)-18, Mumbai [in short CIT(A) ] dated 26/08/2019 which has provided certain relief to the assessee on account of alleged bogus purchases.

2. We have carefully heard the rival submissions and perused relevant material on record. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs.

3.1 The material facts are that the assessee being resident corporate assessee stated to be engaged in trading of chemical was assessed for the year under consideration u/s 143(3) on 21/03/2014. During assessment proceedings, it transpired that the assessee purchased import license for Rs.2.66 Lacs from an entity namely M/s Magnum Enterprises. The supplier was listed as bogus supplier by Sales Tax Department, Mumbai. Therefore, the assessee was directed to substantiate these purchases.

3.2 The assessee filed purchase bill, bank statements evidencing payment through banking channels and documents proving utilization of import license. However, Ld. AO observed that no documents were filed in respect of M/s Magnum Enterprises and the onus to substantiate the purchases remained un-discharged by the assessee. Accordingly, the said amount was disallowed and added back to assessee’s income while framing the assessment.

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FAQ :

The main issue was whether the assessee had adequately substantiated the purchase of an import licence from a supplier who was later identified as potentially bogus.

The import licence was purchased for Rs. 2.66 Lacs.

The assessee provided a purchase bill, bank statements showing payment, and documents proving the utilisation of the import licence.

The Assessing Officer disallowed the purchase because the assessee failed to provide sufficient documentation to substantiate the transaction with the specific supplier, M/s Magnum Enterprises.

The Assessing Officer disallowed the amount, adding it back to the assessee's income, and the appeal by the revenue contested the relief granted by the CIT(A) to the assessee.