2015 (7) TMI 435 - AT - Income Tax

Addition made of bogus invoices - genuineness of purchase transactions - entire payment is made in cash - Held that - Assessee miserably failed to show that these invoices were in any manner genuine. All the inquiries conducted by the AO amply proved that the assessee dejectedly failed to either produce any representative of this concern or substantiate its identity. Summons issued on the given address divulged that this party never existed at the address given on invoices. The telephone number mentioned on the invoices turned out to be fake. When M/s Ankit Electronics filed some confirmation before the AO at the later stages of the assessment through post, a copy of which is available on record, interestingly, telephone number was conspicuously absent this time from the letter pad of this party. All these facts lead to the only irresistible conclusion that the Invoices recorded by the assessee in its books of account were fake and bogus. It is the excess price shown, which should be added rather than the invoice value itself. When we consider the overall gross profit rate of the assessee, it comes to the fore that the current year s GP rate at 3.96% dipped from the preceding year s gross profit rate of 4.41%. In the absence of any independent reasons to justify decline in the GP rate, it is such reduction in the profit, which was sought to be achieved by over-invoicing transactions through fictitious bills raised in the name of M/s Ankit Electronics. - preceding year s gross profit rate of 4.41% be applied on the total turnover of the assessee at ₹ 5,99,54,644/- for making addition towards the income which the assessee sought to conceal by raising fake invoices. This would mean sustenance of addition for a sum of ₹ 2,69,796 - Decided partly in favour of assessee.

Summary

Issues:
Confirmation of addition of Rs. 15,34,416 by treating purchases from M/s Ankit Electronics as bogus.

Analysis:
1. The Assessing Officer (AO) observed that the assessee made purchases amounting to Rs. 15,34,416 from M/s Ankit Electronics paid in cash without cheques or drafts. Despite summons and inquiries, M/s Ankit Electronics could not be verified, with discrepancies in invoices and phone numbers leading to suspicion.

2. The AO concluded the purchases were bogus due to lack of genuine evidence. The CIT(A) upheld the addition as the assessee failed to prove the authenticity of transactions, with no representative of M/s Ankit Electronics produced for verification.

3. The appellant argued using Transit passes issued by a competent authority to validate purchases. However, the passes only certified goods movement, not seller genuineness. The absence of maintained stock registers further weakened the appellant's case, with no verifiable opening stock quantity or value.

4. The Tribunal found the transactions with M/s Ankit Electronics to be fake, suggesting the appellant arranged higher invoice values to conceal lower-priced purchases. To calculate the concealed income, the Tribunal applied the preceding year's gross profit rate on the total turnover, resulting in a sustained addition of Rs. 2,69,796.

5. Ultimately, the Tribunal partly allowed the appeal, confirming the addition of Rs. 2,69,796 towards concealed income.