Works by Government Agencies would not Complete if Entire Purchases were held as Non-genuine: Bombay HC upholds  ITAT’s order on Bogus Purchases [Read Order]

In a recent ruling, a Division Bench of Bombay High Court while dismissing the appeal, upheld the order of the Income Tax Appellate Tribunal (ITAT) that the purchases from ten parties were bogus and sustaining that addition to the extent of 12.5% of the amount of the disputed purchases.

The Appellant/assessee, Vishwaskthi Construction is a partnership firm engaged in the business of road repairs/construction as an contractor for Municipal Corporation of Greater Mumbai (M.C.G.M).

During the assessment process, the Assessing Officer (A.O.) discovered that the Assessee had declared total purchases of Rs. 88,53,059 from multiple entities. The Sales Tax Department also provided information about some fictitious parties. The TIN of the parties matched those of the sellers who the appellant claimed to have made transactions from.

Notices under Section 133(6) of the Income Tax Act were issued by the A.O. to which there was no compliance. The assessee is also stated to have failed to produce the said parties from the aforesaid ten entities.

In its order under Section 143(3) read with Section 147 of the Income Tax Act, the A.O. considered the sum of Rs. 88,53,059 as fictitious purchases to inflate the expenditure and added back the same to the total income, which was determined to be Rs. 1,25,57,870.

The addition was kept by the Commissioner of Income Tax (Appeals) to the extent of 12.5%, and the remainder was removed. Additionally, the Income Tax Appellate Tribunal (ITAT) confirmed the CIT(A)’s decision based on the Gujarat High Court’s ruling in the matter of CIT v. Bholanath Poly Fab Pvt. Ltd.

Justice Kamal Khata and Justice Dhiraj Singh Thakur bench  noted that it would be impossible to explain how the works assigned to the assessee for execution by the semi-government agencies could be completed if the entire amount of purchases were determined to be non-genuine purchases.  Only the purchases made from the ten providers may be regarded as fictitious, not the remainder.

Further stated that there is no question of law involved in the case and thus the order of the tribunal has no need of interference.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates