2017 (12) TMI 1071 - AT - Income Tax

Addition of bogus purchases - CIT-A restricting addition to the extent of 15% - Held that - The conclusion reached at by the Ld. CIT(A) is a reasonable and fair one in view of the fact that the purchases made by assessee were related to his construction work, the books were audited and the assessee was in possession of requisite purchase documents and all payments were made through banking channels. 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. The case law relied upon by Ld. CIT(A) could not be applied to the instant case as the said case law dealt with a search case where certain incriminating material was found which led to the additions in question. Therefore, we do not find any infirmity in the order of Ld. CIT(A) and see no reason to interfere with the same. Hence, by confirming the same, we dismiss revenue s appeal.

Summary

Issues:
Appeal against order restricting addition of bogus purchases to 15%.

Analysis:
1. The appeal by the revenue for Assessment Year 2010-11 challenged the CIT(A)'s order limiting the addition of bogus purchases to 15% instead of fully disallowing ?1,94,89,015 made by the AO. The assessee, a resident firm engaged as a builder & developer, was assessed at ?1,94,89,015 by the AO. The purchases from certain suppliers were flagged as bogus based on information from the Sales Tax Department. Despite the assessee's claims and submission of documents, the AO treated the purchases as unexplained expenditure under section 69C, leading to the additions.

2. The CIT(A) partially allowed the assessee's appeal, reducing the additions to 15% of total purchases. The assessee argued that the purchases were genuine, necessary for their projects, supported by audited accounts, and made through banking channels. The CIT(A) considered these factors and judicial precedents to arrive at the reduced addition, which the revenue contested, placing the burden of proof on the assessee.

3. The Tribunal analyzed the contentions, CIT(A)'s findings, and the factual circumstances. It noted that the purchases were linked to the construction work, audited, and supported by documents and banking transactions. Referring to precedents, the Tribunal emphasized that not all purchases were necessarily bogus, and only the profit element needed consideration. The Tribunal distinguished a search case precedent cited by the revenue, finding no basis to interfere with the CIT(A)'s order, ultimately dismissing the revenue's appeal.

4. The Tribunal's decision upheld the CIT(A)'s order, emphasizing the reasonableness of the reduced addition and the genuineness of the purchases for the construction projects. The Tribunal's analysis focused on the specific circumstances of the case, the evidentiary support provided by the assessee, and the legal principles governing such situations, leading to the dismissal of the revenue's appeal.

5. In conclusion, the Tribunal's decision confirmed the dismissal of the revenue's appeal, highlighting the adequacy of the CIT(A)'s order in addressing the disputed additions related to the bogus purchases, considering the factual and legal aspects presented during the proceedings.