2017 (10) TMI 236 - AT - Income Tax

Bogus purchases - addition at 4% of the purchases by CIT-A as against 8% of the purchases treated as non-genuine/bogus by the Assessing Officer - Held that - In the absence of delivery challans, proper stock records and based on the depositions of the suppliers that they have provided only accommodation bills, the Assessing Officer has rightly concluded that the assessee has obtained only bogus bills and assessee might have purchased goods in gray market. We do not see any valid reason to interfere with the findings and the decision arrived at by the Ld.CIT(A) in estimating the Gross Profit at 4% of the bogus purchases as against 8% estimated by the Assessing Officer. Thus, we uphold the order of the Ld.CIT(A) for all these Assessment Years i.e. 2010-11, 2011-12 and 2012-13. - Decided against assessee.

Summary

Issues:
Assessment of purchases as non-genuine at 4% instead of 8%.

Analysis:
The appeals were filed by the assessee against the orders of the Commissioner of Income Tax (Appeals) for the Assessment Years 2010-11, 2011-12, and 2012-13. The main contention of the assessee was that the Commissioner erred in confirming the addition at 4% of the purchases instead of 8% treated as non-genuine by the Assessing Officer. The assessments were reopened based on information that the assessee benefited from bogus purchases made by entities managed by certain individuals. The suppliers were not produced, and no delivery challans were furnished to prove the movement of goods. The Assessing Officer concluded that the purchases were non-genuine, as the suppliers admitted to providing accommodation entries only. The Commissioner upheld this decision, citing precedents and industry profit margins.

During the appeal, the assessee argued that most sales were 'H' Form sales to associated enterprises, and the addition should not be restricted to 4% as the Commissioner did. The Department supported the Commissioner's orders, emphasizing the reasonableness of the 4% addition. The Tribunal considered the submissions and evidence provided. It noted the lack of proof of goods movement, absence of delivery challans, and the suppliers' admission of providing accommodation bills. The Assessing Officer estimated the Gross Profit Margin at 8%, which the Commissioner reduced to 4% based on industry reports and precedents. The Tribunal found no reason to interfere with the Commissioner's decision and upheld the estimation of Gross Profit at 4% for the bogus purchases. Consequently, the appeals of the assessee were dismissed, affirming the Commissioner's order.

In summary, the judgment revolved around the assessment of purchases as non-genuine at 4% instead of 8%. The Tribunal upheld the Commissioner's decision based on the lack of evidence of goods movement, admission of accommodation entries by suppliers, and industry profit margins. The Tribunal found no grounds to interfere with the Commissioner's estimation of Gross Profit at 4% for the bogus purchases, ultimately dismissing the assessee's appeals.