2021 (11) TMI 1100 - AT - Income Tax

Bogus purchases - AO on account of information received from Maharashtra Sales Tax Authorities - HELD THAT - There is no other material with the Revenue to corroborate the information so received from the Sales Tax Department in order to make the impugned addition nor established that the so-called bogus purchase or the sum equivalent thereof was returned to the assessee in any manner. It appears from the record that no internal inquiry has been carried out by the Revenue to vouch the fact of bogus purchases. CIT(A) has recorded that the appellant has submitted documentary evidence to establish the genuineness of purchase made from the parties but the factum of the said billings parties being engaged in the bogus bills was not ruled out. Accordingly after examining all the facts and circumstances and also relying upon decision on similar issue he restricted the impugned addition and estimated the same at 10% of alleged bogus purchases - We do not find any infirmity in the approach of the ld.CIT(A) in restricting the impugned additions and therefore his order does not warrant our intervention in this score. We confirm the order of the CIT(A) and dismiss this ground of appeal of the Revenue.

Summary

Issues involved:
1. Maintainability of Revenue's appeals under CBDT Circular No.17 of 2019
2. Validity of additions made by AO on account of bogus purchases
3. Decision of CIT(A) in restricting the additions
4. Appeal by Revenue against CIT(A)'s decision

Detailed Analysis:
1. The first issue pertains to the maintainability of the Revenue's appeals under CBDT Circular No.17 of 2019, which prohibits filing appeals before the Tribunal where tax effect is below Rs.50.00 lakhs. The Tribunal noted that the Revenue's appeals were filed after the issuance of the circular but fell within the exception provided in para-10 of Circular 03/2018. This exception includes cases where the tax effect is not relevant, such as when additions are based on information from law enforcement agencies. In this case, the addition was made based on information from the Maharashtra Sales Tax Authority, falling under the exception. Therefore, the Tribunal found merit in the Revenue's submission and proceeded to dispose of the appeals on merit.

2. The second issue revolves around the validity of additions made by the AO on account of bogus purchases. The AO made additions based on information received from the Maharashtra Sales Tax Authority regarding alleged bogus purchases from hawala billers. The assessee failed to provide a satisfactory explanation, leading to the additions. However, in the appeal before the CIT(A), the assessee presented arguments supported by audited accounts and case laws to establish the genuineness of the purchases. The CIT(A) restricted the additions by estimating 10% of the alleged bogus purchases, considering various factors and precedents. The Tribunal upheld the CIT(A)'s decision, noting the lack of corroborative material from the Revenue to support the additions.

3. The third issue concerns the decision of the CIT(A) in restricting the additions made by the AO. The CIT(A) considered the evidence presented by the assessee, including documentary proof of genuine purchases, but did not rule out the possibility of the billers engaging in bogus activities. Relying on precedents and the ITAT decision, the CIT(A) restricted the additions to 10% of the alleged bogus purchases. The Tribunal found the CIT(A)'s approach reasonable and upheld the decision, stating that there was no need for intervention.

4. Lastly, the Tribunal addressed the appeal by the Revenue against the CIT(A)'s decision. The Tribunal found that the issues and conclusions in the other two appeals were identical to the first one, and based on the reasoning provided earlier, rejected the grounds raised in the additional appeals. Consequently, all three appeals of the Revenue were dismissed by the Tribunal on 17th November 2021 at Ahmedabad.