The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has disallowed 25% of the alleged bogus purchase on account of inflation of purchase price.
The assessee Sumer Chand Jain is an individual who engaged in the business of trading in export handicraft goods and jewellery. For AY 2010-11, the assessee filed his return on 28.09.2010 and it was processed under Section 143(1) of the Income Tax Act. Subsequently, the assessment was reopened.
In response to the notice under section 148 of the Income Tax Act, the assessee submitted to treat the return filed as return filed in response to notice. The assessee was required to prove the genuineness of the transaction of alleged purchases from five parties.
The assessee filed copies of invoices raised by the respective seller, details of payments made to respective parties through banking channel, ledger account of these parties etc. The assessee also filed confirmation from the respective parties.
It was the contention of the assessee that when he had made export of goods, then definitely he had also made purchases for export. Without purchases it was not possible to export the same.
It was also submitted that entire goods were exported out of India from purchases made after clearance from customs authorities and payments were received through banking channels.
Amit Shukla, S appeared on behalf of the revenue.
The two-member bench of Anil Chaturvedi, (Accountant Member) and Astha Chandra, (Judicial Member) observed that the assessee had purchased goods without bills from some other suppliers otherwise sales could not have affected and that he had been benefited by providing margin of grey market.
The tribunal following the decision of Vijay Protein Ltd. and Sanjay Oil Cake Industries held that the lower authorities instead of treating the entire impugned purchases as bogus and adding the same to the income of the assessee had rightly restricted the addition to 25% of such purchases.
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