2018 (5) TMI 2010 - AT - Income Tax

Bogus purchases - making additions @ 12.5% on the purchases by holding the said purchases bogus - HELD THAT - When the payment to the concerned parties are through proper banking channel and there is no evidence before the Assessing Officer that the payments made were again routed back to the assessee hence the additions were made by the AO on estimation @ 12.5% of the bogus purchases and the said order was also upheld by Ld. CIT(A). We further notice that AO made no efforts to check the bank accounts of the suspected parties to find the track of money paid whether it was received back by the assessee. Even the statements recorded by the Sales Tax Department and the material collected by I.T. Department had not been made available to the assessee. AO did not appreciated the evidences adduced by the assessee to substantiate his purchases from the said parties including details such as bills ledger account copy of invoices bank statements etc In order to check possible revenue leakage certain additions may be sustained in the present case in the given facts and circumstances and that could be on the basis of estimation by adjusting the existing gross profit on the bogus purchases already declared by the assessee which are amounting to 3, 45, 771/-. We also found that assessee has also paid to Sales Tax Department a sum of Rs. 5, 22, 266/- and after taking into consideration both the above figures the additions which are required to be upheld to the tune of Rs. 2, 28, 819/- as per the chart submitted by the assessee. Therefore we are inclined to modify the orders passed by Ld. CIT(A) and to restrict the additions to the extent of 2, 28, 819/- of such purchases. Appeal filed by the assessee is partly allowed.

Summary

Issues:
1. Addition of alleged purchases
2. Confirmation of interest charged under sections 234A, 234B, and 234C

Issue 1: Addition of alleged purchases
The appellant challenged the order confirming the addition of Rs. 13,06,000 on account of alleged purchases, which was 12.50% of Rs. 1,04,46,243. The appellant, engaged in the metals business, declared total income at Rs. 3,55,984 for the relevant year. The Assessing Officer (AO) received information indicating bogus purchase bills, leading to notices under the IT Act. The AO made additions on purchases @ 12.5%, considering them as bogus. The Commissioner of Income Tax (Appeals) dismissed the appeal. The appellant argued that genuine purchases were made, supported by invoices, delivery challans, ledger accounts, and bank statements. The appellant contended that the high GP estimate by revenue authorities was unreasonable. The ITAT noted various decisions supporting the appellant's argument that non-appearance of suppliers doesn't prove purchases were not made. The ITAT found the AO's basis for disallowance lacked conclusive evidence and upheld the appellant's documentary evidence authenticity. The ITAT modified the addition to Rs. 2,28,819, considering existing GP and sales tax payments.

Issue 2: Confirmation of interest charged under sections 234A, 234B, and 234C
The judgment did not provide detailed analysis or discussion specific to the confirmation of interest charged under sections 234A, 234B, and 234C. The focus of the judgment primarily revolved around the addition of alleged purchases and the related evidence and arguments presented by the appellant.

In conclusion, the ITAT partially allowed the appeal, modifying the addition of alleged purchases and providing detailed reasoning based on documentary evidence and legal precedents. The judgment highlighted the importance of thorough investigation and evidence evaluation in assessing alleged transactions, emphasizing the need for a rationale judgment based on the provisions of the IT Act.