2013 (7) TMI 825 - AT - Income Tax

Penalty u/s 271(1)(c) - Bogus purchase - CIT(A) has confirmed the addition to the extent of 25% of the total alleged bogus purchases by the assessee - Held that - assessee has furnished quantitative details of material purchased and material sold - addition of 12.5% of the alleged bogus purchase will meet the ends of justice - Following decision of VIJAY PROTEINS LTD. Versus ASSISTANT COMMISSIONER OF INCOME TAX. 2002 (2) TMI 349 - ITAT RAJKOT - Decided partly in favor of assessee.

Summary

Issues involved:
1. Validity of reopening of assessment for the years 2003-04 and 2004-05.
2. Merit of the addition made by the Assessing Officer (A.O.) and confirmed by the Commissioner of Income Tax (CIT) in both years.

Validity of Reopening of Assessment:
The appeals were filed against two separate orders of the Ld. CIT(A) for the assessment years 2003-04 and 2004-05. The first issue raised by the assessee was regarding the validity of reopening the assessment. The Ld. A.R. did not press this issue, leading to its rejection as not pressed in both years.

Merit of the Addition:
Regarding the merit of the addition made by the A.O. and confirmed by the Ld. CIT(A), the latter upheld the addition of Rs.1 lakh out of a total of Rs.4 lakh for the assessment year 2003-04, and Rs.1,12,768 out of Rs.4,51,070 for the year 2004-05. The additions were confirmed to the extent of 25% of the alleged bogus purchases by the assessee in both years, leading the assessee to appeal further.

Arguments and Considerations:
The Ld. A.R. cited a tribunal decision where it was held that an addition/disallowance of 12.5% on account of bogus purchases would suffice. The tribunal considered the case where the names of the parties from whom material was purchased were the same as in the present case. The Ld. CIT(A) noted that the assessee had provided quantitative details of material purchased and sold, with payments made through explained funds. The Ld. D.R. supported the Ld. CIT(A)'s order, arguing that upholding the addition would result in a gross profit exceeding sales.

Judgment and Decision:
After considering the submissions, the material on record, and previous tribunal decisions, the tribunal found that an addition of 12.5% on alleged bogus purchases would meet the ends of justice in the present case. The tribunal relied on precedents and upheld the Ld. A.R.'s contention. It was noted that the assessee had provided detailed information on purchases and sales. Therefore, the tribunal directed the A.O. to make the addition accordingly for both years, resulting in the partial allowance of the assessee's appeals.

This detailed analysis of the judgment covers the issues of validity of reopening of assessment and the merit of the addition made by the A.O., providing a comprehensive overview of the tribunal's decision and the arguments presented by the parties involved.