ITO, R. No. 227, Aayakar Bhavan, M. K. Road, Mumbai vs. M/s. Varsha Corporation Ltd.

Parties Involved

Facts Summary

The assessee, M/s. Varsha Corporation Ltd., filed its return of income for A.Y. 2017-18 on 30.10.2017 declaring a loss of Rs. (-) 13,72,272/-. The Assessee Company is engaged in the business of trading Plastic raw materials and bullions. The Assessing Officer (AO) held that the Assessee Company had obtained bogus bills for non-existing purchases amounting to Rs. 6, 76, 07,844/- for A.Y. 2017-18 and thereby reduced its taxable income. The Assessee being aggrieved by this order of the AO preferred an Appeal before the Ld. Commissioner of Income Tax (Appeals). The Ld. Commissioner of Income Tax (Appeals) allowed the appeal of the Assessee and deleted the above mentioned addition/ disallowances made by the AO and restricted the disallowance to 2% of the alleged bogus purchases. Aggrieved by this order of the Ld. Commissioner of Income Tax (Appeals) the Revenue preferred the present appeal before the Income Tax Appellate Tribunal (ITAT).…

Legal Issues

• 1. Whether the Ld. Commissioner of Income Tax (Appeals) erred in restricting the addition to a certain percentage without duly appreciating the fact that the Assessing Officer had conducted inquiries to ascertain the genuineness of the purchases.
• 2. Whether the Ld. Commissioner of Income Tax (Appeals) erred in restricting the disallowance to 2% of the bogus purchase made from M/s. Shashwat Jewellery Pvt. Ltd. without appreciating the fact that, Hon'ble Supreme Court in the case of NK Proteins Ltd us. DCIT (2017) 292 CTR 354 (SC) has held that, once the categorical finding is made that the purchases made from certain party are bogus, it is not incumbent to restrict the disallowance to certain percentage of such purchase.

Judgment Outcome

Decided in favour of Partly Assessee / Partly Revenue.

Precedents Relied Upon

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