ITAT Mumbai Remands 8% Bogus Purchase Estimation in Ramniklal Savla Case

The “H (SMC)” Bench of the Income Tax Appellate Tribunal, Mumbai, set aside the order restricting bogus purchase addition to 8% and remanded the matter for fresh adjudication in the case of Ramniklal Shivji Savla for AY 2009–10.

Background: 25% Addition Reduced to 8%

The Assessing Officer had treated purchases of ₹1.73 crore from four entities identified by the Maharashtra Sales Tax Department as bogus and made an addition at 25% of such purchases. On appeal, the CIT(A) restricted the disallowance to 8%, following the Tribunal’s earlier order in the assessee’s own case for AY 2011–12. That earlier decision, relying on judicial precedents, held that where sales are accepted as genuine, only the profit element embedded in non-genuine purchases should be taxed.

Tribunal: Fresh Examination Required

Before the ITAT, the Revenue argued that subsequent judicial developments, particularly the Bombay High Court ruling in Pr. CIT v. Kanak Impex (India) Ltd. and principles emerging from N.K. Proteins, required reconsideration of the issue. The Tribunal observed that the CIT(A) had mechanically followed the earlier ITAT order without examining whether the factual matrix for AY 2009–10 was identical or whether later binding precedents altered the legal position. Accordingly, the Tribunal set aside the impugned order and restored the matter to the CIT(A) for fresh adjudication in light of applicable binding precedents, after granting due opportunity of hearing.

The Revenue’s appeal was allowed for statistical purposes.