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2016 (9) TMI 1562 - AT - Income TaxBogus purchases - disallowance sustained by the Ld.CIT(A) @17.5% - HELD THAT - Findings recorded by the Ld.CIT(A), it is evident that total purchases were wrongly disallowed by the Assessing Officer. The Ld.CIT(A) took a reasonable view whereby the disallowance was sustained to the extent of estimated inflation in the amount of purchases made by the assessee. The disallowance sustained by the Ld.CIT(A) @17.5% of the purchases have been accepted by the assessee with a view to bury the litigation. Nothing has been brought before us by the Ld.DR to contradict the findings recorded by the Ld.CIT(A). The assessee s counsel has also placed reliance upon case of CIT vs Nikunj Eximp Enterprises Pvt Ltd 2013 (1) TMI 88 - BOMBAY HIGH COURT wherein similar issue has been decided on identical lines by the Hon ble Bombay High Court. In our view, no intervention is required in the findings of Ld.CIT(A) and, therefore, the same is confirmed. The grounds raised by the revenue are dismissed.
Issues:
1. Disallowance of alleged bogus purchases. 2. Admission of additional evidence without providing an opportunity to the Assessing Officer. 3. Application of Hon'ble Gujarat High Court decision in the case of CIT vs Simit P. Seth. 4. Failure of the assessee to substantiate purchase entries with 8 parties. Analysis: 1. The appeal was filed by the revenue against the CIT(A)'s order regarding the disallowance of alleged bogus purchases. The Assessing Officer disallowed the total amount of purchases made by the assessee from 8 parties based on information from the Investigation Wing, without pointing out any deficiencies in the documentary evidences submitted by the assessee. The CIT(A) considered the submissions and documentary evidences, concluding that the purchases were not entirely bogus, directing the AO to estimate profit at 17.5% on the alleged bogus purchases, which was accepted by the assessee. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal. 2. The appellant raised issues regarding the admission of additional evidence without providing an opportunity to the Assessing Officer. During the hearing, the Ld. DR failed to point out any additional evidence considered by the CIT(A), leading to the dismissal of this ground. The Tribunal confirmed that no additional evidence was indeed considered by the CIT(A), thereby dismissing this issue. 3. The application of the Hon'ble Gujarat High Court decision in the case of CIT vs Simit P. Seth was contested. The CIT(A) applied the ratio of this decision in estimating the profit element in the alleged bogus purchases. The Tribunal found the CIT(A)'s approach reasonable and in line with judicial precedents, leading to the dismissal of the revenue's grounds challenging this application. 4. The failure of the assessee to substantiate purchase entries with 8 parties was also a key issue. The Assessing Officer did not provide adverse material to support the allegations and solely relied on information from the sales tax department. The CIT(A) analyzed the circumstances and found that the appellant had made cash purchases from other parties not recorded in the books, leading to an estimation of 17.5% profit on the alleged bogus purchases. The Tribunal upheld the CIT(A)'s findings, dismissing the revenue's grounds related to this issue. In conclusion, the Tribunal affirmed the CIT(A)'s decision, dismissing the revenue's appeal and confirming the estimation of profit at 17.5% on the alleged bogus purchases.
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