2020 (3) TMI 1337 - HC - Income Tax

Estimation of income - bogus purchases - Tribunal confirming the addition being 25% of the alleged bogus purchases - HELD THAT - As in the facts of the present case, as the Co-ordinate Bench of this Court has already dismissed Cross Appeal filed by the Revenue confirming the order passed by the Tribunal, it would not serve any purpose to remand the matter back to the Tribunal so as to give finding of fact in order to ascertain whether the decision of this Court in GUJARAT AMBUJA EXPORT LTD. 2014 (2) TMI 1344 - GUJARAT HIGH COURT would be applicable so as to restrict the addition to 5% of the total bogus purchase made by the assessee from M/s Vishal Traders. Assessee did not give any explanation in respect of the bogus purchases and also taking note of the fact that during the course of appellate proceedings the remand report was called for from the Assessing Officer in that regard and after considering the remand report, the CIT(A) found as a matter of fact the purchases shown from Vishal Traders were not actual purchase but only bills had been obtained and the cheques issued to M/s Vishal Traders were only an eye wash, the cash was returned back to the assessee. The assessee in the present case has not placed on record either before Assessing Officer or before CIT(A) with regard to its GP rate or maintenance of the stock register or to show that the prices shown in the bills of the Vishal Traders where the current prevailing price of the goods, which was shown as purchases by the assessee. The CIT(A) has carried out a detailed inquiry and on analysis of facts has come to the conclusion that as the purchases claimed from the Gayatri Cotton could not be substantiated by the appellant-assessee and there is nothing on record to show that the cash purchases made by the appellant were true and correct. No purpose would be served to remand the matter back to the Tribunal so as to give an opportunity of hearing to the appellant as the Tribunal has passed the impugned order in absence of the appellant. No legal infirmity of the impugned order passed by the Tribunal - No substantial question of law.

Summary

Issues Involved:
1. Addition of 25% of alleged bogus purchases.
2. Violation of principles of natural justice due to ex parte decision by the Tribunal.

Detailed Analysis:

1. Addition of 25% of Alleged Bogus Purchases:
The primary issue revolves around whether the Income Tax Appellate Tribunal (ITAT) was correct in confirming the addition of ?46,25,927/- being 25% of the alleged bogus purchases of ?1,85,03,709/- without any reason or basis.

Facts and Proceedings:
- The assessee's business premises were surveyed under Section 133A of the Income Tax Act, 1961, revealing bogus purchases amounting to ?5,67,49,767/- and undisclosed income of ?1,13,84,071/-. The purchases were allegedly made from M/s Vishal Traders and Gayatri Cotton, which were found to be issuing bogus bills without actual delivery of goods.
- The Assessing Officer (AO) added the entire amount of ?5,67,49,767/- as bogus purchases. The CIT(A) reduced this to 25%, citing the Gujarat High Court's decision in Sanjay Oilcake Industries vs. Commissioner of Income-Tax, which was also upheld by the ITAT.

Arguments:
- The assessee argued that the Tribunal did not consider the facts of the case and merely followed the decision in Sanjay Oilcake Industries. The assessee contended that the AO did not reject the books of accounts under Section 145 of the Act, 1961, and the sales and closing stocks were not disputed.
- The Revenue argued that the Tribunal's decision was consistent with the Gujarat High Court's earlier rulings and that the addition of 25% was justified based on the facts and circumstances.

Judgment:
- The Tribunal and the High Court upheld the addition of 25% of the alleged bogus purchases. The High Court found that the purchases shown from Vishal Traders were bogus, but the assessee had indeed made purchases reflected in the stock and corresponding sales. The CIT(A) and the Tribunal's reliance on the Sanjay Oilcake Industries case was deemed appropriate.

Conclusion:
- The High Court concluded that there was no legal infirmity in the Tribunal's order and that the addition of 25% of the bogus purchases was justified. The appeal was dismissed, confirming the Tribunal's decision.

2. Violation of Principles of Natural Justice:
The second issue concerns whether the ITAT violated the principles of natural justice by deciding the appeal ex parte without providing the appellant a sufficient opportunity of being heard.

Facts and Proceedings:
- The assessee claimed that it did not receive notice for the hearing due to inaccessibility of its premises, leading to an ex parte decision by the Tribunal.
- The Tribunal dismissed the appeals filed by both the assessee and the Revenue without the presence of the assessee.

Arguments:
- The assessee argued that the ex parte decision violated the principles of natural justice and requested an opportunity to be heard.
- The Revenue maintained that the Tribunal's decision was based on the merits of the case and the existing records.

Judgment:
- The High Court noted that the Tribunal's decision was consistent with the findings of the CIT(A) and the earlier High Court rulings. It emphasized that remanding the case back to the Tribunal would not serve any purpose as the Tribunal's decision was based on substantial evidence and legal precedents.

Conclusion:
- The High Court held that there was no violation of the principles of natural justice as the Tribunal's decision was well-founded and based on the merits of the case. The appeal was dismissed, and the Tribunal's order was upheld.

Summary:
The High Court addressed two primary issues: the addition of 25% of alleged bogus purchases and the ex parte decision by the ITAT. The Court upheld the Tribunal's decision to add 25% of the bogus purchases, citing substantial evidence and legal precedents. It also found no violation of the principles of natural justice, as the Tribunal's decision was based on the merits of the case. Both appeals were dismissed, confirming the Tribunal's order.