2018 (11) TMI 1898 - AT - Income Tax

Estimation of income - bogus purchases - Addition sustained by Ld. CIT(A) to the tune of 25% of the total bogus purchases - HELD THAT - We find that the AO has not disputed the consumption of material in the development of property meaning thereby that assessee might have purchased the goods from the grey market and under these circumstances it is only the percentage of the total such purchases has to be brought to tax. The Ld. CIT(A) sustained the addition at 25% which is quite unreasonable and on the higher side - we find from the perusal of the orders of co-ordinate bench of the Tribunal in the case of Adeshwer 2018 (2) TMI 1785 - ITAT MUMBAI that the Tribunal in group concerns restricted the addition to 3% of the total such purchases. We, therefore, respectfully following the said orders of the co-ordinate bench of the Tribunal direct the AO to make the addition at the rate of 3% of such bogus purchases. Appeals of the assessee are partly allowed

Summary

Issues involved: Appeal against CIT(A)'s order on addition of bogus purchases at 25% instead of 100% disallowance made by AO.

Analysis:
1. Background: The appellant, engaged in property development, challenged the CIT(A)'s decision regarding the addition of 25% of total bogus purchases instead of the 100% disallowance by the AO for the assessment year 2012-13.

2. AO's Findings: During assessment, the AO observed that the appellant debited purchases from parties listed as bogus dealers by the Sales Tax Department. The AO concluded that the appellant did not purchase any material but availed accommodation bills, leading to additions in the assessment for the relevant years.

3. CIT(A)'s Decision: The CIT(A) partly allowed the appeal by confirming the addition of 25% of the total bogus purchases. The appellant contended that they had purchased goods from these dealers, supported by bills, vouchers, and other evidence, and argued for a lower addition based on Tribunal decisions in similar cases.

4. Appellant's Argument: The appellant asserted that the AO did not question the material's consumption, providing detailed evidence of purchases. They referred to Tribunal rulings limiting disallowances to 3% in comparable cases involving group companies.

5. Revenue's Stand: The Revenue supported the CIT(A)'s decision, emphasizing that the appellant had indeed availed bogus bills from the mentioned parties, justifying the 25% addition.

6. Tribunal's Decision: After reviewing the facts and arguments, the Tribunal acknowledged the appellant's use of bogus bills but noted the lack of dispute regarding material consumption. Citing previous Tribunal decisions, the Tribunal deemed the 25% addition excessive and directed the AO to restrict it to 3% of the bogus purchases, aligning with the precedents.

7. Conclusion: Consequently, the Tribunal partially allowed both appeals, reducing the addition to 3% of the total bogus purchases, in line with the Tribunal's consistent approach in similar cases.

This detailed analysis outlines the background, findings, decisions, arguments, and the final ruling of the Appellate Tribunal ITAT MUMBAI in the appeal concerning the addition of bogus purchases, providing a comprehensive understanding of the judgment.