2018 (2) TMI 346 - AT - Income Tax

Addition u/s 69C to 12.5% of the alleged bogus purchases - Held that - Considering assessee s appeal on identical issue of estimation of profit on alleged bogus purchases for the very same assessment year the Tribunal though, upheld the estimation of profit on alleged bogus purchases @ 12.5%, however, directed the Assessing Officer to reduce the gross profit already declared by the assessee from the profit to be estimated at 12.5% of the bogus purchases. The learned Departmental Representative also agreed with the aforesaid submissions of the assessee. As could be seen from the material on record, while deciding assessee s appeal arising out of the impugned order of the Commissioner (Appeals) the Tribunal has directed the AO to adopt the profit rate on alleged bogus purchases @ 12.5% and thereafter reduce the gross profit already declared by the assessee to quantify the disallowance on account of alleged bogus purchases. Addition on account of difference in closing and opening stock - Held that - Neither before the Assessing Officer nor before the first appellate authority the assessee appeared and reconciled the difference in closing and opening stock with supporting evidence. Therefore, there were no other options before the Departmental Authorities but to treat the difference between the closing and opening stock as income of the assessee. However, considering the submissions of the learned Authorized Representative that given an opportunity the assessee will be able to reconcile the difference in closing and opening stock with supporting evidence, we are inclined to restore the issue to the file of the Assessing Officer for de novo adjudication after providing due opportunity of being heard to the assessee. This ground is allowed for statistical purposes.

Summary

Issues:
1. Disallowance/addition under section 69C of the Income Tax Act, 1961.
2. Addition on account of difference in closing and opening stock.
3. Addition made on account of alleged bogus purchases.

Analysis:
1. The first issue pertains to the disallowance/addition under section 69C of the Income Tax Act. The Revenue's appeal challenged the decision of the Commissioner (Appeals) in restricting the disallowance to 12.5% of alleged bogus purchases. The Tribunal upheld the decision based on a previous case where a similar estimation was accepted. The Tribunal directed the Assessing Officer to adopt the profit rate of 12.5% and reduce the gross profit already declared by the assessee to quantify the disallowance, leading to the dismissal of the Revenue's appeal.

2. The second issue concerns the addition on account of the difference in closing and opening stock. The assessee failed to reconcile the difference, resulting in the Assessing Officer treating the differential amount as undisclosed opening stock. The Commissioner (Appeals) sustained the addition as the assessee did not appear or provide evidence. The Tribunal, considering the circumstances, allowed the ground for statistical purposes and restored the issue to the Assessing Officer for de novo adjudication after providing the assessee with an opportunity to reconcile the difference.

3. The final issue involves the addition made on account of alleged bogus purchases. The Assessing Officer treated the purchases as bogus due to lack of evidence from the assessee. The Tribunal noted that the assessee did not appear or provide supporting evidence at any stage. While the assessee cited a previous case for a lower addition percentage, the Tribunal differentiated the current case due to the lack of evidence. The Tribunal allowed the ground for statistical purposes and restored the issue to the Assessing Officer for further adjudication, emphasizing the need for the assessee to provide evidence to prove the genuineness of the purchases.

In conclusion, the Revenue's appeal was dismissed, and the assessee's appeal was partly allowed for statistical purposes. The Tribunal provided detailed reasoning for each issue, emphasizing the importance of evidence and compliance with statutory procedures in tax assessments.