2017 (12) TMI 739 - AT - Income Tax

Addition made u/s 69C towards bogus purchases - rejection of books of accounts - Held that - In view of the discussion the conclusion arrived at by the Ld.CIT(A) that there should not be separate addition u/s. 69C of the Act when the profit is estimate at 2% by rejecting the Books of Accounts of the assessee is upheld.

Summary

Issues:
Appeal against deletion of addition made u/s 69C for bogus purchases.

Analysis:
The Revenue appealed against the deletion of an addition made u/s 69C of the Income Tax Act for bogus purchases by the Assessing Officer. The assessee, engaged in software trading, declared a loss in the return filed for the Assessment Year 2010-11. The Assessing Officer added an amount under u/s 69C as unexplained expenditure due to purchases from seven parties. Notices were issued to these parties, but only partial information was provided. Subsequently, the Assessing Officer estimated the income at 2% of turnover due to rejected Books of Accounts and non-genuine purchases.

Upon appeal, the CIT(A) upheld the rejection of Books of Accounts but deleted the addition u/s 69C. The CIT(A) concluded that the purchases and sales were accommodation entries based on the admission of one of the directors. The CIT(A) supported the Assessing Officer's estimation of net profit at 2% but disagreed with the addition u/s 69C.

During the hearing, the Revenue and the assessee's counsel supported the positions of the Assessing Officer and the CIT(A) respectively. The ITAT noted the Assessing Officer's treatment of purchases as bogus due to lack of proof and the involvement of suspicious dealers. The CIT(A) upheld the rejection of Books of Accounts based on admission of accommodation transactions. The ITAT agreed with the CIT(A) that once income is estimated, no separate addition should be made u/s 69C, citing legal precedents supporting this position.

In conclusion, the ITAT dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the addition u/s 69C while upholding the net profit estimation at 2%. The judgment was pronounced on October 11, 2017.