2017 (12) TMI 1687 - AT - Income Tax

Bogus purchases - CIT(A) disallowing the total purchases at 25% thereby giving relief to the assessee in respect of 75% - HELD THAT - An identical issue was considered by the Hon ble jurisdictional High Court of Gujarat in the case of N.K. Industries Limited vs. DCIT 2016 (6) TMI 1139 - GUJARAT HIGH COURT as observed that it would be just and proper to direct the Assessing Officer to restrict the addition in respect of the undisclosed income relating to the purchase to 25% of the total purchases - we decline to interfere with the findings of the CIT(A) in restricting the addition/disallowances to 25% of the bogus purchase. - Decided against revenue

Summary

Issues:
Cross appeals by assessee and Revenue against CIT(A) orders for assessment years 1992-93 to 1997-98 regarding treatment of purchases as sham purchases and disallowance at 25%.

Analysis:
The appeals involved cross appeals by the assessee and Revenue against separate orders of the CIT(A) for various assessment years. The main issue revolved around certain purchases being treated as sham purchases by the Assessing Officer, leading to additions in the total purchases. The CIT(A) had restricted the disallowance to 25% of the purchases, providing relief to the assessee in respect of 75% of the total purchases. The Assessing Officer accepted the corresponding sales from these purchases, raising questions about the treatment of debit entries as income. The Tribunal referred to a similar case decided by the High Court, emphasizing the need to consider all expenses as debits and income as credits. The Tribunal declined to interfere with the CIT(A)'s decision, as no distinguishing decision favoring the Revenue was presented, and the facts aligned with the High Court's findings.

The Revenue's appeals were dismissed based on the above analysis. On the other hand, the assessee's appeals faced dismissal due to a significant delay in filing without proper formal request or adherence to delay condonation rules. Consequently, all appeals by both parties were dismissed, and the order was pronounced in open court on December 13, 2017.