2017 (6) TMI 1186 - AT - Income Tax

Bogus purchases - profit estimation - Held that - As the facts and circumstances during the year under consideration are parametria, respectfully following the order of the Tribunal in assessee s own case, we direct the AO to restrict the addition to the extent of 12.5%.

Summary

Issues:
1. Addition of alleged bogus purchases under section 69C of the IT Act
2. Chargeability of Interest under sections 234A, 234B, and 234C

Analysis:
1. Addition of alleged bogus purchases under section 69C of the IT Act:
The Assessing Officer (AO) concluded that the assessee suppressed income by debiting bogus bills in the Profit & Loss account, leading to an addition of ?51,08,901. The AO disallowed the entire amount of hawala purchases, as parties were declared suspicious by the Sales Tax Department. The CIT(A) restricted the addition to 25% of the bogus purchases, amounting to ?12,77,226. The CIT(A) considered the GP/NP rates and past performance, indicating possible inflation of purchases rather than complete siphoning off. The Tribunal referred to similar cases and reduced the addition further to 12.5% based on the assessee's inability to prove purchases but demonstrating consumption of raw materials.

2. Chargeability of Interest under sections 234A, 234B, and 234C:
The Revenue contended that the CIT(A) erred in not confirming the addition at 100% of the alleged bogus purchases despite the assessee's failure to prove their genuineness. However, the Tribunal found that the assessee maintained detailed records, including ledger accounts, invoices, bank statements, and stock registers, supporting the genuineness of transactions to some extent. The Tribunal relied on earlier decisions and directed the AO to restrict the addition to 12.5% of the bogus purchases. Consequently, the appeal of the Revenue was dismissed, while the appeal of the assessee was partially allowed.

In conclusion, the ITAT, Mumbai upheld the CIT(A)'s decision to limit the addition of alleged bogus purchases to 12.5% based on the assessee's records and the Tribunal's precedent in similar cases. The judgment highlights the importance of maintaining comprehensive documentation to substantiate transactions and the significance of judicial precedents in determining additions in tax assessments.