2017 (4) TMI 1622 - AT - Income Tax

Bogus purchases - On the basis of information of Sales Tax Department, AO found that suppliers were bogus, also AO issued notices u/s.133(6) to these parties but the same were returned with a remark not known - HELD THAT - From the record, we found that AO has relied upon an affidavit of Pravin Meraj Bishnoi / Shah stating that he is the Proprietor of four concerns, however, all these concerns are having different proprietors and different PAN. AO has also relied upon a visit report of Asst. Commissioner, Sanjay S. Pawar, Mumbai in respect of one concern namely Jitendra Enterprises. However, the assessee has not purchased any goods from the said concern at all. As per record, the assessee has asked for the copies of statements of the different persons upon which the AO was relying upon as well as their cross examination.This observation in AO s order clearly indicates that ground No.3 taken by revenue is not correct. We direct the AO to restrict the addition to the extent of 2.5% of such alleged purchases. Addition u/s.69A - assessee was asked to explain sources of payment towards purchase of property - after giving effect to the housing loan taken from Reliance and payment form current account the remaining amount was treated by AO as unexplained and added to the total income of the assessee - HELD THAT - As our attention was invited to the loan sanction letter by the Reliance Home Finance and also the relevant bank statement. It appears that AO has not properly appreciated the documentary evidence placed on record. In the interest of justice, we restore this issue back to the file of the AO for verifying the correct amount of loan taken from Reliance Home Finance, pay orders made by the assessee from his own bank account towards the stamp duty and registration charges. Accordingly, AO is to decide the issue afresh.

Summary

Issues:
Cross appeals by Revenue and assessee against CIT(A) order for A.Y. 2010-11 under section 143(3) of the IT Act.

Analysis:
1. Bogus Purchases: The assessee, a proprietor of a trading business, claimed purchases from parties identified as bogus by the Sales Tax Department. The AO treated the entire purchase amount as bogus income despite genuine sales supported by bills and cheques. The assessee requested statements and cross-examination opportunities, but the AO did not provide them. The Tribunal found the GP and NP rates reasonable compared to previous years and directed the AO to restrict the addition to 2.5% of the alleged purchases, considering the totality of facts.

2. Addition under Section 69A: The AO added Rs. 5,63,224 as unexplained income related to property purchase. The CIT(A) upheld this addition. The AR highlighted discrepancies in loan amounts and payment evidence. The Tribunal noted the AO's oversight of debits for stamp duty and registration charges and directed a re-verification of the loan amount and payment evidence, emphasizing the need for a fair opportunity for the assessee.

3. Final Decision: The Revenue's appeal was dismissed, while the assessee's appeal was partially allowed. The Tribunal restored the issue of unexplained income from property purchase to the AO for re-examination, emphasizing fair verification and opportunity for the assessee. The judgment was pronounced on 21/04/2017 by the ITAT Mumbai.