2017 (9) TMI 1886 - AT - Income Tax

Bogus purchases - Addition based on information received from the Sales tax department - CIT(A) sustained the rate of 12.50%, but the directed the AO to reduce the GP already declared by the assessee on the impugned purchases - HELD THAT - As perused the order passed by the division bench in the assessee s own case for AY 2009-10 2017 (5) TMI 1101 - ITAT MUMBAI . Since the facts are identical, consistent with the view taken therein, modify the order passed by Ld CIT(A) and direct the AO to restrict the addition to 2% of the value of alleged bogus purchases. Appeal filed by the assessee is partly allowed.

Summary

Issues: Alleged bogus purchases leading to addition in income tax assessment for AY 2011-12.

Analysis:
1. The appeal was filed by the assessee challenging the addition made by the Assessing Officer (AO) in relation to alleged bogus purchases in the assessment year 2011-12, based on information from the Sales tax department regarding purchases made from hawala dealers. The AO estimated a profit element of 12.50% on the value of purchases, resulting in an addition of ?25.50 lakhs to the total income of the assessee.

2. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the 12.50% profit estimation but directed the AO to reduce the Gross Profit (GP) already declared by the assessee on the impugned purchases. Dissatisfied with this decision, the assessee appealed the order.

3. During the hearing, the assessee's Authorized Representative (A.R) pointed out a similar addition made in AY 2009-10, where the ITAT had restricted the addition to 2% of the value of alleged bogus purchases in the assessee's own case. Considering the identical facts, the present Appellate Tribunal decided to modify the CIT(A)'s order and directed the AO to limit the addition to 2% of the value of alleged bogus purchases.

4. The Tribunal's decision to restrict the addition to 2% aligns with the precedent set in the assessee's case for AY 2009-10 by the ITAT. Therefore, the appeal filed by the assessee was partly allowed, providing relief by reducing the addition amount in line with the earlier judgment.

5. The order was pronounced on 12.9.2017, with the Appellate Tribunal emphasizing consistency in decisions and applying a lower percentage for the addition, resulting in a partial success for the assessee in challenging the addition related to alleged bogus purchases.