2017 (1) TMI 898 - AT - Income Tax

Estimation of profit @ 8% on the alleged bogus purchases - Held that - As in absence of any evidence to prove the fact that the assessee had actually taken delivery of goods, assessee s claim that purchases were genuine cannot be accepted. Therefore, the assessee s claim that the entire addition should have been deleted is not acceptable. At the same time, it is a fact on record, that the A.O. has not disputed the sales effected by the assessee. Hence, the assessee might have purchased the goods from some other source. Taking this into consideration and also the fact that the assessee has failed to prove beyond doubt that the purchases made from the concerned parties are genuine, there is no other option but to estimate the profit element embedded in the bogus purchases. Moreover, we have also noted that the assessee himself before the A.O. as well as ld. CIT(A) had taken an alternate contention to estimate the profit at 8%. Therefore, on an overall consideration of facts and materials on record, we are of the considered view that the ld. CIT(A) was justified in estimating the profit at 8% of the bogus purchases

Summary

Issues involved:
Estimation of profit at 8% on alleged bogus purchases.

Analysis:
1. The appeal and cross objection were against the estimation of profit at 8% on the alleged bogus purchases for the assessment year 2010-11.
2. The Assessing Officer (AO) found certain purchases made by the assessee to be bogus based on information from the Sales Tax Department.
3. The AO issued notices to parties involved, but they were not found at their addresses, leading to doubts about the genuineness of the transactions.
4. The assessee claimed purchases were genuine, supported by builder and architect certificates and payment evidence, but failed to produce parties or conclusive proof of delivery.
5. The CIT(A) observed that while the purchases may not be entirely genuine, the profit element should be estimated at 8% as per section 44AD, not the entire amount.
6. The tribunal agreed with the CIT(A) that the purchases were not fully proven to be genuine, and estimating the profit at 8% was justified based on the evidence and lack of conclusive proof.
7. The tribunal dismissed the Revenue's appeal and the assessee's cross objection, upholding the estimation of profit at 8% on the alleged bogus purchases for the assessment year.

This detailed analysis covers the key aspects of the judgment, including the background, arguments presented, evidentiary considerations, and the final decision reached by the tribunal.