2018 (7) TMI 1859 - AT - Income Tax

Disallowance of bogus purchases - Held that - Assessee furnished the purchase bills and the evidences for payment to the suppliers through banking channels. Copies of the bank statements are evident in the records. Nowhere it is mentioned that the assessee failed to prove the trail of goods to the premises of the assessee. It is not the case of mere buying the accommodation entries through the entry operators but there is an undisputed fact of buying the equivalent purchases from the grey market. Therefore, it is a case of not offering the relevant profits properly in the return of income. Therefore, the CIT(A) s decision in restricting the disallowance to 15% on account of such purchases, despite the books results are already offered by the assessee, is fair and reasonable. Accordingly, the grounds raised by the assessee are dismissed.

Summary

Issues:
Cross appeals by Assessee and Revenue against CIT(A) order for A.Y. 2009-10.

Detailed Analysis:

1. Revenue's Appeal:
The Revenue challenged the CIT(A)'s decision on two grounds related to alleged non-genuine purchases. The AO disallowed purchases of ?50,43,126 made from certain parties listed as Hawala Operators, adding the entire amount to the income. Additionally, an amount of ?7,05,512 for purchases from other parties was also disallowed. In the First Appellate proceedings, the CIT(A) deleted the ?7,05,512 addition but confirmed a portion of the ?50,43,126 addition based on Gross Profit rate, citing a judgment for the adjustment. The Revenue appealed against the CIT(A)'s decision. During the hearing, the AR for the assessee argued that the Revenue's appeal was not maintainable due to low tax effect, referencing a CBDT circular. The DR for the Revenue defended the assessment order but acknowledged the tax effect was below the appeal threshold. The Tribunal noted the tax effect was less than ?20 lakhs, in line with the CBDT circular, and dismissed the Revenue's appeal.

2. Assessee's Appeal:
The Assessee contested the CIT(A)'s decision to uphold an addition of ?7,56,469 on purchases from specific parties, applying a 15% Gross Profit rate. The CIT(A) reasoned that the purchases were supported by evidence, and the Gross Profit adjustment was fair considering previous GP rates and VAT benefits. The Tribunal reviewed the CIT(A)'s findings and upheld the decision, emphasizing that the Assessee provided purchase bills and payment evidence through banking channels. The Tribunal concluded that the CIT(A)'s decision to restrict the disallowance to 15% was reasonable, despite the Assessee's offered book results. Consequently, the Assessee's appeal was dismissed.

In conclusion, both the Revenue and Assessee's appeals were dismissed by the Tribunal based on the detailed analysis and findings related to the disputed additions in the assessment for the A.Y. 2009-10.