2015 (8) TMI 1163 - AT - Income Tax

Trading addition - Justification of Gross Profit Rate - bogus purchases - Held that - This Bench has already decided identical issue in the case of Shri Anuj Kumar Varshney Vs. ITO & others gems and jewellery cases 2015 (4) TMI 533 - ITAT JAIPUR wherein detailed findings are given on bogus purchases. Therefore, by respectfully following our own decision the above case on same identical facts and circumstances, we apply 15% N. P. on bogus purchases claimed by the assessee. It is clarified that by applying 15% N. P., the addition is worked out at ₹ 17,39,682/-. However, we do not have any power to enhance the addition under the law, therefore, we confirm the addition made by the ld Assessing Officer at ₹ 16,08,982/-. - Decided in favour of revenue. Disallowance made on account of ad hoc addition - CIT(A) deleted addition - Held that - Hon ble ITAT, Jaipur Bench in the case of Triveni Pharma 2004 (9) TMI 331 - ITAT JAIPUR had deleted the ad hoc addition. The assessee had filed reasonable explanation before the Assessing Officer and relied on the decision in case of Lal Chand Bhagat Ambica Ram Vs. CIT (1959 (5) TMI 12 - SUPREME Court) and Harish Kumar Vs DCIT (2002 (5) TMI 218 - ITAT HYDERABAD-B ) and prayed to confirm the order of the ld CIT(A).The addition under the head bogus purchases has already been confirmed by this Bench and the ld DR had not controverted the findings of the ld CIT(A). The depreciation is a statutory deduction, therefore, we uphold the order of the ld CIT(A) - Decided against revenue.

Summary

Issues Involved:
1. Trading addition made by the Assessing Officer.
2. Disallowance of expenses made by the Assessing Officer.

Issue 1: Trading Addition:
The appeal by the revenue and cross objection by the assessee arose from the order passed by the CIT (A)-I, Jaipur for A.Y. 2008-09. The Assessing Officer made a trading addition of &8377; 16,08,982 in the income of the assessee due to unverified purchases from two parties, which were later found to be involved in providing bogus bills. The assessee failed to produce these parties for verification despite multiple opportunities. The CIT (A) upheld the rejection of the books of accounts under Section 145(3) due to unverifiable purchases. The CIT (A) estimated the GP rate at 13% to cover the loss of revenue from bogus purchases, resulting in a confirmed trading addition of &8377; 5,71,521. The assessee contended that the accounts need not be rejected as they reflected the true state of affairs, presenting various documents for verification. The ITAT confirmed the addition made by the Assessing Officer at &8377; 16,08,982, as they did not have the power to enhance the addition under the law.

Issue 2: Disallowance of Expenses:
The Assessing Officer disallowed expenses amounting to &8377; 68,081, claiming that proper bill vouchers were not maintained, payments were made in cash, and there was personal use of the car. The CIT (A) deleted this addition, stating that there was no evidence that the expenses were bogus, inflated, or for non-business purposes. The nature of petty expenditures and the mode of payment in cash did not warrant a 20% ad hoc disallowance. The revenue appealed this decision, but the ITAT upheld the CIT (A)'s order, citing statutory allowance for depreciation and lack of evidence to support the disallowance. Therefore, the revenue's appeal on this ground was dismissed.

The judgment by the ITAT Jaipur addressed the issues of trading addition and disallowance of expenses, providing detailed analysis and reasoning for each issue, ultimately partly allowing the revenue's appeal and dismissing the assessee's cross objection.