2017 (11) TMI 1825 - AT - Income Tax

Bogus purchases - addition @6% - addition on the basis of information from the Sales Tax department in respect of bogus suppliers - HELD THAT - CIT(A) concluded that the entire purchases cannot be held to be bogus merely on the bases of the statement of the seller, who was never cross examined by the assessee. It was also observed that corresponding sales/consumption shown by the assessee accepted by the Department. After applying various Judicial pronouncements the CIT(A) restricted the addition to the extent of 6% on the alleged bogus purchases. Nothing was brought to our notice by DR to persuade us to deviated from the finding recorded by the CIT(A) restricting the addition to the extent of 6%. Accordingly we do not find any reason to interfere in the order of the Ld. CIT(A). - Decided against revenue.

Summary

Issues:
- Addition of 6% on bogus purchases confirmed by Ld.CIT(A) for A.Y.2010-11 under section 143(3) r.w.s. 147 of the I.T Act.

Analysis:
1. The appeal filed by the Revenue concerns the confirmation of the addition of 6% on bogus purchases by the Ld.CIT(A) for the assessment year 2010-11. The Assessing Officer received information from the Sales Tax Department indicating that the assessee engaged in providing bogus purchase bills. The AO found that the assessee made bogus purchases from nine parties, totaling ?54,33,026, which was added to the total income. Despite producing relevant documents and ledger accounts, the assessee failed to produce the parties for verification, and an independent inquiry revealed the non-existence of the parties. Consequently, the AO treated the purchases as bogus and made the aforementioned addition.

2. The Ld.CIT(A) confirmed the addition to the extent of 6% of the Gross Profit. The Ld.CIT(A) noted that the AO relied on information from VAT authorities without providing an opportunity for cross-examination. The assessee contended that purchases were genuine, supported by banking transactions and delivery challans. The primary onus to establish the genuineness of purchases was on the assessee, who partially discharged the onus by providing bills and bank statements. The Ld.CIT(A) considered judicial precedents and restricted the addition to 6% of the alleged bogus purchases.

3. Upon further appeal, the Tribunal upheld the Ld.CIT(A)'s decision. The Tribunal found that the AO's addition was based on information from the Sales Tax department regarding bogus suppliers. The Ld.CIT(A) concluded that the entire purchases could not be deemed bogus solely based on the seller's statement, especially since the corresponding sales were accepted by the Department. Considering the evidence and legal principles, the Tribunal agreed with the 6% addition on the alleged bogus purchases. The Tribunal dismissed the Revenue's appeal, finding no reason to interfere with the Ld.CIT(A)'s order.

In conclusion, the Tribunal affirmed the Ld.CIT(A)'s decision to restrict the addition to 6% of the alleged bogus purchases, emphasizing the importance of evidence and legal precedents in determining the tax liability on such transactions.