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2017 (6) TMI 435 - AT - Income TaxAddition of bogus purchases - Held that - We find that the facts of the case do not justify full disallowance against the impugned purchases particularly when the assessee was in possession of invoices, payments were though banking channels, quantitative details were available on record and sales turnover were not doubted by the revenue. The Tribunal, invariably, in all such cases, have taken a stand that even if presuming that all purchases were bogus, entire addition thereof was not warranted for particularly when the sales were not in dispute and the addition, if any, which has to be made in all such cases is to account for profit element embedded in such purchase transactions. Therefore, we restrict the said disallowance to 12.5% of alleged bogus purchases of ₹ 39,18,195/- which comes to ₹ 4,89,774/-. The assessee s appeal stands partly allowed.
Issues:
Assessment of bogus purchases for AY 2009-10 and AY 2011-12. Analysis: For AY 2009-10, the assessee contested the addition of bogus purchases amounting to ?39,18,195 before the Ld. CIT(A) but was unsuccessful. The AO treated the purchases as bogus due to lack of physical delivery evidence. The AR argued that as the sales turnover was not doubted, the purchases should not be considered bogus. The ITAT found that the assessee had invoices, made payments through banking channels, and had quantitative details available. The Tribunal held that full disallowance was not justified and restricted it to 12.5% of the alleged bogus purchases, amounting to ?4,89,774, allowing the appeal partly. For AY 2011-12, a similar disallowance of ?27,05,774 was made for bogus purchases, which was confirmed by the Ld. CIT(A). The ITAT applied the same principle as in the previous year and restricted the disallowance to 12.5% of the amount, i.e., ?3,38,222, partially allowing the appeal. The AO was directed to recompute Book Profits u/s 115JB and adjust any business losses accordingly. In conclusion, both appeals by the assessee were partly allowed by the ITAT.
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