2017 (6) TMI 11 - AT - Income Tax

Addition on bogus purchases - Held that - It would be reasonable and proper if the addition is sustained to the extent of 10% of the bogus purchase as the purchases were made in cash totally and the there were lot discrepancies in the books of account of the assessee and therefore, in the present case it would be fair and reasonable if the addition is restricted and sustained to 10% of the total purchases in order to cover the leakages of revenue. - Decided partly in favour of assessee.

Summary

Issues:
Challenge to order of ld.CIT(A)-44, Mumbai for assessment year 2011-12.
Delay in filing appeal by 33 days.
Confirmation of addition of ?34,82,851 on account of bogus purchases from three parties.
Application of GP rate on amount of bogus purchases.
Sustainability of addition at 10% of total purchases.

Analysis:
1. Challenge to CIT(A) Order: The appellant contested the order of the ld.CIT(A)-44, Mumbai for the assessment year 2011-12, specifically focusing on the confirmation of an addition of ?34,82,851. The sole issue raised in the appeal pertained to this addition made by the AO on account of alleged bogus purchases from three different parties. The appellant sought redressal against this specific aspect of the CIT(A) order.

2. Delay Condonation: The appeal filed by the assessee was delayed by 33 days. The reason cited for the delay was the misplacement of appeal-related papers due to renovation and shifting of records at the office. The appellant submitted an affidavit to explain the delay. The Tribunal, after considering the contentions of both parties, concluded that the delay was due to a reasonable cause. Emphasizing the essence of justice, the Tribunal condoned the delay and admitted the appeal for adjudication.

3. Application of GP Rate: The appellant argued that a similar issue had been decided in their favor by a Co-ordinate Bench of the Tribunal in a previous case. The Tribunal referred to the previous decision where the addition on account of bogus purchases was restricted to 5% of the total amount. However, after evaluating the current case, the Tribunal deemed it appropriate to sustain the addition at 10% of the total purchases. This decision was based on the fact that the purchases were made entirely in cash, and discrepancies were found in the appellant's books of account.

4. Decision and Conclusion: After considering the arguments presented by both sides, the Tribunal partially allowed the appeal of the assessee. The addition on account of bogus purchases was sustained at 10% of the total purchases, aiming to address revenue leakages. The Tribunal's decision was pronounced in the open court on 12th May 2017.