2018 (10) TMI 1181 - AT - Income Tax

Rectification of mistake - error in cause title - directing the AO to estimate 30% net profit on alleged bogus purchases - Held that - No enquiries were made by the AO from the suppliers either u/s 133(6) or otherwise to establish the fact that the purchases were in the nature of accommodation bills. Merely because the assessee has voluntarily offered the said purchases to tax does not absolve the AO from his responsibility of proving that the purchases were in fact taxed particularly when the disclosure was impliedly retracted by contesting the addition during assessment and appellate proceedings. AO has not brought out any evidence on record by conclusively proving that the purchases were not genuine and merely relied upon the sales-tax department s list coupled with assesse s own admission on the said purchases during survey action u/s 133A, to make the addition. Under similar facts and circumstances, the co-ordinate bench of ITAT, Kolkata Bench in assessee s sister concern case in DCIT vs Laboratories Griffon Pvt Ltd 2018 (4) TMI 709 - ITAT KOLKATA for AY 2011-12 has restricted the disallowance @30% of the alleged bogus purchases. Therefore, we direct the AO to restrict addition @30% of alleged bogus purchases. Addition made towards capital goods from the alleged suspicious dealers - Held that - We find that the ITAT, Mumbai Bench in the case of New Consolidated Construction Co Ltd vs DCIT 2017 (12) TMI 928 - ITAT MUMBAI has considered similar issue and held that findings given in respect of purchases of raw materials shall apply to purchases of capital goods in case of alleged bogus purchases and accordingly direct the AO to estimate 12.5% profit on alleged bogus purchases of capital goods and balance amount shall be treated as capital asset and depreciation shall be allowed at the prescribed rates. Thus we direct the AO to estimate 30% profit on alleged bogus purchase of capital goods and the balance amount shall be treated as purchase of capital assets and accordingly, depreciation shall be allowed at the prescribed rates on capitalized portion - Decided partly in favour of assessee.

Issues Involved:
1. Errors in the ITAT order regarding the nature of purchases and stock register.
2. Non-adjudication of ground related to the purchase of capital assets from suspicious parties.
3. Incorrect recording of facts regarding the survey under section 133A.
4. Mistakes in the cause title regarding the respondent's name and assessment years.
5. Factual errors in recording the Commissioners of Appeals who disposed of the appeals.

Detailed Analysis:

1. Errors in the ITAT order regarding the nature of purchases and stock register:
The assessee pointed out that the ITAT order contained factual errors regarding the nature of purchases and their inclusion in the stock register. Specifically, the ITAT had incorrectly stated that the purchases of gift items were included in the stock register and that the sales were not doubted. The assessee clarified that the purchased items were for distribution to dealers and not for sale, hence not included in the stock register. The Tribunal acknowledged these errors and modified the observations in para 6 on page 11 and para 8 on page 15 of the original order to reflect the correct facts.

2. Non-adjudication of ground related to the purchase of capital assets from suspicious parties:
The assessee contended that the ITAT had failed to adjudicate on the specific ground related to the purchase of capital assets from suspicious parties. The Tribunal agreed that this ground was inadvertently omitted and rectified the error by directing the AO to estimate 30% profit on the alleged bogus purchases of capital goods and treat the balance amount as capital assets, allowing depreciation at the prescribed rates.

3. Incorrect recording of facts regarding the survey under section 133A:
The ITAT order incorrectly recorded that the assessee's director had voluntarily admitted to bogus purchases during the survey under section 133A. The assessee clarified that the director had only offered unverifiable purchases for taxation due to the inability to fully justify them, not admitting to bogus purchases. The Tribunal recognized this factual error and modified the relevant observations to accurately reflect the director's statement.

4. Mistakes in the cause title regarding the respondent's name and assessment years:
The assessee highlighted errors in the cause title of the ITAT order, where the respondent's name and assessment years were incorrectly mentioned. The Tribunal rectified these errors by correctly identifying the respective assessing officers for each assessment year and modifying the cause title accordingly.

5. Factual errors in recording the Commissioners of Appeals who disposed of the appeals:
The ITAT order incorrectly mentioned that the appeals were disposed of by CIT(A)-44 and CIT(A)-48, whereas they were actually disposed of by different Commissioners for each assessment year. The Tribunal acknowledged this factual error and modified the order to correctly reflect the Commissioners of Appeals who disposed of the appeals.

Conclusion:
The Tribunal allowed the miscellaneous applications filed by the assessee, rectifying the factual errors and omissions in the original order. The Tribunal directed the AO to estimate 30% profit on the alleged bogus purchases, including capital goods, and allowed depreciation on the capitalized portion. The appeals for the assessment years 2010-11 to 2012-13 were partly allowed, and the necessary modifications were made to the ITAT order to reflect the correct facts and adjudicate the omitted grounds.

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