2022 (12) TMI 1439 - AT - Income Tax

Estimation of income - bogus purchases - addition sustained by the ld. CIT(A) at the rate of 5% of bogus purchases - HELD THAT- We note that the issue under consideration is squarely covered by the judgement of the Co-ordinate Bench in the case of Pankaj K. Chaudhary 2021 (10) TMI 653 - ITAT SURAT wherein the Co-ordinate Bench of Surat has sustained the addition at the rate of 6% of bogus purchases. Thus we dismiss the appeals of the assessees and we allow the appeals of the Revenue partly.

Issues Involved:
1. Maintainability of the Revenue's appeal due to low tax effect.
2. Withdrawal of the assessee's appeal.
3. Condonation of delay in filing appeals by the assessee.
4. Addition of bogus purchases by the Assessing Officer (AO).
5. Restriction of addition by the Commissioner of Income Tax (Appeals) [CIT(A)].
6. Cross-appeals by the assessee and Revenue regarding the percentage of addition for bogus purchases.

Detailed Analysis:

1. Maintainability of Revenue's Appeal Due to Low Tax Effect:
The Revenue's appeal in ITA No. 65/SRT/2019 for AY 2013-14 was dismissed as the tax effect involved was Rs. 48,68,030/-, which is below the monetary limit of Rs. 50,00,000/- prescribed by the Central Board of Direct Tax (CBDT) in Circular No. 17/2019 dated 08.08.2019. The Tribunal held that the appeal filed by the Department is contrary to the policy decision of the Department and dismissed the appeal in limine.

2. Withdrawal of Assessee's Appeal:
The assessee's appeal in ITA No. 169/SRT/2021 for AY 2013-14 was dismissed as not pressed after the assessee expressed the desire to withdraw the appeal.

3. Condonation of Delay in Filing Appeals by the Assessee:
The assessee's appeals in ITA Nos. 167, 168, and 170/SRT/2021 for AY 2013-14 were delayed by 977 days. The delay was attributed to the medical condition of Shri Vrajendra Jagjivandas Thakkar, who was handling the income tax matters and was under treatment for liver cirrhosis. The Tribunal found the reasons convincing and constituted reasonable and sufficient cause for the delay. The delay was condoned, and the appeals were admitted for hearing on merit.

4. Addition of Bogus Purchases by the Assessing Officer (AO):
The AO made a 100% addition of bogus purchases, holding that the assessee made purchases from Shri Gautam Jain/Dharmichand Jain Group without actually receiving the material. The AO concluded that the purchases were inflated and bogus, debited to suppress true profits, and added the total amount of Rs. 28,68,83,424/- to the income of the assessee.

5. Restriction of Addition by the Commissioner of Income Tax (Appeals) [CIT(A)]:
The CIT(A) restricted the addition to 5% of the bogus purchases, relying on the judgment of the jurisdictional High Court in the case of M/s. Mayank Diamond Pvt. Ltd. and the jurisdictional ITAT. The CIT(A) observed that the facts were identical to other cases where similar disallowances were restricted to 5%.

6. Cross-Appeals by the Assessee and Revenue Regarding the Percentage of Addition for Bogus Purchases:
Both the assessee and the Revenue were aggrieved by the CIT(A)'s order. The assessee contended that the 5% addition should be deleted, while the Revenue argued that the 100% addition made by the AO should be sustained. The Tribunal referred to the judgment in the case of Pankaj K. Chaudhary, where the addition was sustained at 6% of bogus purchases. Following this precedent, the Tribunal dismissed the appeals of the assessees and partly allowed the appeals of the Revenue, sustaining the addition at 6% of the bogus purchases.

Conclusion:
The Tribunal concluded by dismissing the appeals filed by the assessees in ITA Nos. 167, 168, and 170/SRT/2021 and partly allowing the appeals filed by the Revenue in ITA Nos. 48/SRT/2019, 62/SRT/2019, and 66/SRT/2019, sustaining the addition at 6% of the bogus purchases. The order was pronounced in the open court and directed to be placed in all appeals folders/case files.

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