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2017 (6) TMI 64 - AT - Income TaxAddition on account of bogus purchases - Held that - From the documents placed on record as find that the purchased material has been used in the business of the Assessee in manufacturing cable reeling drums and cable drag chain. The same were subsequently sold to the various parties and income received from the said transaction was offered for tax. The Assessee to substantiate the genuineness of the purchases furnished purchase bills, sales bills, bank statement, party wise purchase and sales details before the A.O. Gross Profit of the impugned assessment year is in consonance of the Gross Profit declared for the earlier and subsequent assessment years. Under these facts and circumstances, relying on the decision of Bombay High Court in case of Nikam Exims Pvt. Ltd. 2013 (1) TMI 88 - BOMBAY HIGH COURT hold that addition to the extent of 10% of such bogus purchase will serve the purpose, keeping in view the nature of trade being carried on by the assessee vis-a-vis other facts and circumstances of the case. - Decided partly in favour of assessee.
Issues:
Appeals against orders of CIT(A) for A.Y. 2009-10, 2010-11, and 2011-12 regarding addition on account of bogus purchases. Analysis: The appeals were filed by the assessee challenging the orders of CIT(A) for the mentioned assessment years concerning the addition on account of bogus purchases. The assessee's primary grievance was the confirmation of the entire addition on such purchases. The reassessment proceedings were initiated based on information from the Sales Tax Department indicating bogus purchases. The AO reopened the assessment and issued notices under section 148 of the IT Act. The assessee contended that the revised returns filed should be considered as a response to the notice. The AO made substantial additions to the income in all three assessment years due to alleged bogus purchases. The CIT(A) upheld the additions disregarding the assessee's plea to consider only the profit element of the purchases. The AO asked the assessee to substantiate purchases from specific parties, alleged to have issued bills without delivering goods. The AO finalized the assessment, disallowing a significant amount under section 69C of the IT Act. The AO alleged that the assessee obtained bogus bills from certain parties for iron sheets purchased. However, the assessee used the purchased material in its business and offered income from subsequent transactions for tax. The assessee provided various documents to substantiate the genuineness of the purchases, including purchase bills, sales bills, bank statements, and party-wise details. The gross profit for the impugned year was consistent with previous and subsequent years. The tribunal, considering the nature of the trade and the facts of the case, relied on a decision of the Bombay High Court and directed the AO to restrict the addition to 10% of the bogus purchases. This decision was applied to all the years under consideration due to the parametria of the facts and circumstances being similar. Consequently, the appeals of the assessee were allowed in part, and the addition on account of bogus purchases was limited to 10% for all the relevant years. In conclusion, the tribunal's judgment provided relief to the assessee by reducing the addition on bogus purchases to 10% for all the assessment years in question, based on the specific facts and circumstances of the case and legal precedents cited.
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