2016 (11) TMI 1683 - AT - Income Tax

Estimation of income - bogus purchases - CIT-A restricted the addition @12.5% - HELD THAT - Revenue s plea is entirely misconceived since the said co-ordinate bench merely admitted assessee s additional evidence to direct the CIT(A) for afresh adjudication of the issue. The lower appellate authority has duly considered the same in its order to agree with the Assessing Officer s findings in principle that the assessee has not been able to prove genuineness of its grey cloth purchases. It thereafter is of the opinion that it is not the entire purchases but only the gross profit element therein has to be added @12.5% of the amount in question. DR fails to dispute the fact that assessee s sales/exports of the grey cloth already stand accepted. Nor does it file before us any material to conclude that the above percentage of the addition is in any way unreasonable. We thus find no reason to interfere with the lower appellate order restricting the impugned bogus purchases addition in peculiar facts of the case. It is made clear that the above percentage shall not be treated as a precedent in any preceding or succeeding assessment year in assessee s cases. Decided against revenue.

Summary

Issues:
Revenue's appeal against CIT(A)'s order restricting bogus purchases addition.

Analysis:
The Revenue's appeal pertains to assessment year 2003-04 challenging the CIT(A)'s order limiting the addition of bogus purchases to a lower amount than assessed by the AO. The main contention is that the CIT(A) erred in not following the tribunal's remand directions from a previous round of proceedings. The AO disallowed the entire sum incurred on grey cloth purchases due to lack of evidence regarding the genuineness of purchases. The payees parties were not produced, notices went unanswered, and no supporting evidence was presented. The CIT(A) upheld the addition initially, leading to an appeal before the tribunal. The tribunal, in a previous order, directed the CIT(A) to reexamine the issue. However, the CIT(A) found that the appellant failed to prove the genuineness of purchases, did not provide new evidence, and the affidavits submitted were identical with insufficient details. The CIT(A) decided to restrict the addition based on the decisions of the ITAT in similar cases, adding only 12.5% of the bogus purchases amount to the appellant's income. The Revenue contended that the CIT(A) exceeded the remand directions, but the tribunal found the decision justified based on the facts and upheld the lower appellate order. The tribunal clarified that the percentage applied should not set a precedent for future assessments.

In conclusion, the tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order restricting the addition of bogus purchases. The decision was based on the appellant's failure to prove the genuineness of purchases and the application of the ITAT's decisions in similar cases. The tribunal found no grounds to interfere with the lower appellate order and clarified that the percentage added should not be binding in other assessment years.