2023 (3) TMI 1402 - HC - Income Tax

Estimation of income - bogus purchases - CIT(A) sustained addition at 12.5% of the purchase - Tribunal restricted the addition to 6% of the disputed purchases shown by the assessee - HELD THAT - The view taken and the conclusion arrived at by the appellant Tribunal are based on material before it and after analysing the facts and figure available before it. When the Tribunal has thought it fit to reduce the disallowance at 6% from 12.5%, the Tribunal had before it the facts which were duly analysed by it. No interference is called for in the said conclusion and findings of the Tribunal in the present appeal by this court.

Summary

Issues Involved:
The issues involved in this case are related to the assessment of income tax u/s 260A of the Income Tax Act, 1961, concerning the addition of alleged bogus purchases made by the assessee from non-genuine entities associated with accommodation entries provided by a specific group.

Summary of the judgment:

Issue 1: Addition of alleged bogus purchases
The assessment was reopened based on information from the investigation wing, leading to the determination of income at a higher amount due to additions made on the grounds of accommodation entries provided by non-genuine entities. The Commissioner of Income Tax (Appeals) restricted the addition to 12.5% of the purchases, which was further reduced by the Tribunal to 6% of the disputed purchases. The Tribunal's decision was challenged by the department, questioning the estimation of the addition and reliance on previous court decisions.

Issue 2: Disallowance and justification
The appellant argued that the purchases were made through benami concerns linked to a group engaged in providing accommodation entries and bogus transactions. Despite providing evidence like confirmation, purchase bills, and bank statements, the Assessing Officer deemed the transactions as bogus. The Commissioner of Income Tax (Appeals) upheld a disallowance of 12.5% of the purchases, considering the appellant's low profit margins. The Tribunal supported this view, emphasizing the need to tax only the income component of disputed transactions to prevent revenue leakage.

Issue 3: Tribunal's decision and reasoning
The Tribunal reduced the disallowance to 6% after analyzing the turnover, gross profit, and net profit of the assessee. It considered the lack of physical stock found during investigation and compared the case to a previous court decision involving similar issues. The Tribunal concluded that a 6% disallowance would suffice to prevent revenue leakage, based on the facts and circumstances of the case.

Conclusion:
The High Court upheld the Tribunal's decision, stating that no interference was necessary as the Tribunal's conclusion was based on analyzed facts. Additionally, a related case involving the same group and accommodation entries had been decided in favor of the assessee by a co-ordinate Bench. The court found no substantial questions of law in the present case and summarily dismissed the appeal.