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2015 (9) TMI 1173 - AT - Income TaxBogus purchases - addition in respect of sundry creditors - Held that - Find force in the contentions of the ld. counsel for the assessee that only on the basis of sample check on random basis the entire liabilities cannot be treated to be bogus liabilities. At the most, the Assessing Officer if intended to make an addition on the basis of random check, it can only be restricted at ₹ 9,13,613/-, but the entire outstanding liabilities cannot be treated to be bogus on the basis of sample check. But in any case, the ld. CIT(A) has estimated the profit of the assessee @ 7.5% of the gross receipts resulting into an addition of ₹ 9,63,634/-. We have also carefully examined the findings of the ld. CIT(A) and we find that the ld. CIT(A) has properly adjudicated the issue in the given facts and circumstances of the case. Since we find no infirmity therein, we confirm his order on this issue. - Decided against revenue. Addition out of purchases as the purchases were not fully verifiable - CIT(A) deleted the addition - Held that - Revenue could not place any evidence to justify that the assessee has not maintained complete details such as bills and vouchers for purchases. Since no specific defect was pointed out by the Assessing Officer, we find no merit in the disallowance. Accordingly we confirm the order of the ld. CIT(A) on this issue who has rightly deleted the addition. - Decided against revenue.
Issues Involved:
1. Deletion of addition of Rs. 2,44,87,614/- related to sundry creditors. 2. Deletion of addition of Rs. 25,83,748/- related to unverifiable purchases. Issue-wise Detailed Analysis: 1. Deletion of Addition of Rs. 2,44,87,614/- Related to Sundry Creditors: The Revenue contested the deletion of an addition of Rs. 2,44,87,614/- by the CIT(A), which was initially added by the Assessing Officer (AO) as unverified sundry creditors. The AO observed that out of the total liabilities of Rs. 2,48,96,412/-, an amount of Rs. 2,44,87,614/- pertained to sub-contractors. Notices were issued to 44 out of 1050 sub-contractors, with most returned undelivered or unresponded. The AO deemed these liabilities as bogus, adding the amount to the assessee's income. The assessee argued that proper books of account were maintained and verified by Northern Railway officials, and payments were delayed due to delayed receipts from the Railways. The CIT(A) re-examined the issue, noting that the AO's disallowance was based on a sample check and that the entire liability could not be deemed bogus. The CIT(A) estimated the profit at 7.5% of the gross receipts, resulting in an addition of Rs. 9,63,634/-, rather than the entire Rs. 2,44,87,614/-. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's sample check could not justify treating the entire liability as bogus. The Tribunal confirmed the CIT(A)'s estimation of profit at 7.5% of gross receipts, considering it reasonable and consistent with past cases. 2. Deletion of Addition of Rs. 25,83,748/- Related to Unverifiable Purchases: The AO made an ad-hoc disallowance of 10% on purchases amounting to Rs. 1,78,63,188/-, consumables of Rs. 66,73,750/-, and material shifting charges of Rs. 13,00,538/-, totaling an addition of Rs. 25,83,748/-. The AO justified this by claiming the assessee did not maintain complete bills and vouchers. The assessee contended that proper books of account were maintained and all details were provided. The CIT(A) found merit in the assessee's argument, noting that the AO did not point out any specific defects in the books of account and deleted the addition. The Tribunal upheld the CIT(A)'s decision, stating that the Revenue failed to provide evidence that the assessee did not maintain complete details. The Tribunal found no merit in the disallowance and confirmed the deletion of the addition. Conclusion: The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s order on both issues. The deletion of the addition of Rs. 2,44,87,614/- related to sundry creditors was upheld, with the profit estimated at 7.5% of gross receipts. The deletion of the addition of Rs. 25,83,748/- related to unverifiable purchases was also upheld, as no specific defects were pointed out by the AO.
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