2017 (3) TMI 1656 - AT - Income Tax

Estimating the gross profit @ 12.5% of the unproved purchases - Held that - As relying on case of Imperial Imp & Exp. 2016 (3) TMI 1095 - ITAT MUMBAI AO was not justified in making additions merely on the basis of information obtained from the Sales Tax Department of the Government of Maharashtra without conducting any independent enquiries. Before the CIT(Appeals) one of the points raised by the assessee was with respect to an opportunity to cross examine the parties but we find that no such opportunity have been allowed. Considering all addition to made by the Assessing Officer is to be set aside - Decided in favour of assessee.

Summary

Issues:
1. Addition made to income with regard to purchases.

Analysis:
1. The assessee challenged the addition made to her income concerning purchases worth ?1.35 crores from three parties. The AO observed that the genuineness of the transactions was not verifiable as notices to the parties were returned unserved. The AO added ?16.99 lakhs to the income of the assessee, estimating the gross profit at 12.5% of the unproved purchases.

2. The First Appellate Authority (FAA) upheld the AO's decision, stating that it was a case of purchases from bogus parties rather than bogus purchases. The FAA noted that the AO had made efforts to verify the transactions and directed the AO to produce the parties, who were not found at the given addresses. The FAA concluded that the AO was justified in making the addition to the income of the assessee.

3. During the hearing before the Appellate Tribunal, the Authorized Representative (AR) argued that all necessary details were provided to the AO, including stock register and quantitative details. The AR cited various case laws to support the assessee's position. The Tribunal referred to a similar case where the addition was deleted, and based on the precedents and arguments presented, decided in favor of the assessee, allowing the appeal.

4. The Tribunal highlighted that the Assessing Officer did not conduct independent inquiries and relied solely on information from the Sales Tax Department. The Tribunal noted that the assessee's sales were by way of exports, and payments were made through banking channels. The Tribunal found that the CIT(A) erred in sustaining the addition and directed to delete the entire addition made by the Assessing Officer. The Tribunal allowed the appeal filed by the assessee.

In conclusion, the Appellate Tribunal ruled in favor of the assessee, deleting the addition made to the income concerning purchases, based on the lack of independent inquiries by the Assessing Officer and the supporting evidence provided by the assessee.