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2018 (2) TMI 858 - AT - Income TaxAddition made u/s 69C - bogus nature of purchases made from suppliers and the parties were not found existing at the given addresses - estimation of profit - FAA restricted the addition @ 12.5% of the bogus purchases - Held that - In such type of cases, there is no option but to estimate the profit which depends upon the subjective approach of an individual and the material facts available on record. In the present appeals, before this Tribunal, as mentioned earlier, the assessee is in the business of trading of Iron & Steel. AO received information from the Sales Tax Department that the assessee claimed to have made purchases from 15 bogus concerns, the names of whom are available in the assessment order and the Ld. Assessing Officer also made independent enquiries and then made the addition on account of bogus purchases. Even the notices issued u/s 133(6) to such parties were returned unserved. On further investigation by the Inspector of the Department, no such parties were found existing at the given addresses. In such a situation, the First Appellate Authority has taken a reasonable, which requires no interference. Contention of the Ld. counsel for the assessee, that GP of last ten year was not more than 4% is concerned, it depends upon the facts of the each case and probably in other years there may not be allegation of bogus purchases and each year is independent. No material was produced before this Tribunal contradicting the factual finding recorded in the impugned order. - Decided against assessee Addition u/s 68 - Held that - Neither before the Ld. Commissioner of Income Tax (Appeal) nor before this Tribunal, no evidence was produced by the assessee in support of his claim. Thus, considering the factual matrix, no infirmity is found in the conclusion of the Ld. Commissioner of Income Tax (Appeal), resultantly, this ground of the assessee is having no merit, therefore, dismissed.
Issues Involved:
1. Addition under Section 69C of the Income Tax Act, 1961. 2. Addition under Section 68 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Addition under Section 69C of the Income Tax Act, 1961: The primary issue revolves around the addition made under Section 69C of the Income Tax Act, 1961, concerning alleged bogus purchases. The assessee, engaged in the business of Iron and Steel, declared incomes of ?5,79,901/- for Assessment Year 2010-11 and ?8,77,805/- for Assessment Year 2011-12. A survey conducted on 24/01/2013 revealed that the assessee made purchases from parties identified as Hawala operators by the Sales Tax Department of Maharashtra Government. Consequently, the case was reopened, and the Assessing Officer added ?1,48,20,692/- for AY 2010-11 and ?1,95,42,330/- for AY 2011-12 to the assessee's income, considering these purchases as bogus. The assessee contended that the addition was excessive and should be reduced, while the Revenue defended the addition. The First Appellate Authority reduced the addition to 12.5% of the bogus purchases, citing various judicial precedents, including the Hon'ble Gujarat High Court in Sanjay Oilcakes Industries vs CIT (2009) 316 ITR 274 (Guj.), which dealt with similar issues of non-traceable sellers and inflated purchase prices. The Tribunal considered multiple judicial decisions, including CIT vs Bholanath Poly Fab. Pvt. Ltd. (2013) 355 ITR 290 (Guj.) and CIT vs Vijay M. Mistry Construction Ltd. (2013) 355 ITR 498 (Guj.), which supported the view that only the profit margin embedded in such purchases should be taxed. The Tribunal also referenced the Hon'ble jurisdictional High Court in CIT vs Nikunj Exim Enterprises Pvt. Ltd. (2015) 372 ITR 619 (Bom.), which emphasized that the genuineness of purchases should not be doubted merely because suppliers were not produced. The Tribunal upheld the First Appellate Authority's decision to restrict the addition to 12.5% of the bogus purchases, considering it reasonable and consistent with judicial precedents. The Tribunal found no merit in the assessee's claim that the Gross Profit (GP) rate of previous years should be considered, as each assessment year is independent and the allegation of bogus purchases was specific to the years under appeal. 2. Addition under Section 68 of the Income Tax Act, 1961: The second issue pertains to the addition made under Section 68 of the Income Tax Act, 1961, for unexplained cash credits. The assessee was found to have made cash deposits amounting to ?22,93,200/- during a survey operation. The Assessing Officer discovered negative cash balances of ?4,12,460/- for AY 2010-11 and ?6,74,040/- for AY 2011-12, which the assessee failed to explain satisfactorily. The Tribunal emphasized that under Section 68, the onus is on the assessee to satisfactorily explain the nature and source of cash credits. The assessee's explanation was found inadequate, and the Assessing Officer's addition was upheld by the First Appellate Authority. The Tribunal referenced judicial precedents, including P. Mohankala (2007) 291 ITR 278 (SC) and CIT vs Durga Prasad More (72 ITR 807)(SC), which established that unexplained cash credits could be treated as income if the assessee fails to provide satisfactory evidence. The Tribunal found no infirmity in the First Appellate Authority's decision to confirm the addition under Section 68, as the assessee did not produce any evidence to substantiate his claim during the appellate proceedings. Conclusion: The Tribunal dismissed the appeals of the assessee, upholding the additions made under Sections 69C and 68 of the Income Tax Act, 1961. The decision was pronounced in the open court on 19/12/2017, in the presence of representatives from both sides.
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