2019 (3) TMI 62 - HC - Income Tax

Bogus purchases - addition u/s 69C - Tribunal disallowing 12.5% of the bogus purchases - HELD THAT - There is no mention of the grievance by the Assessee or even with regard to non-consideration of various documents such as Sales Ledger Purchase Ledger etc. by AO in the order of the Tribunal. The submission of Assessee that the same was urged before the Appellate Tribunal but was not considered cannot be accepted. If the Tribunal had failed to make a note of the submission of a party in its order then the appropriate remedy for the party was to move the Tribunal for rectification of the order ensuring it that the submissions made by it are recorded in the order. Given the factual matrix that the Appellant had not challenge the finding of bogus purchases the above issue could not have been raised by it before the Tribunal. Disallowance in the present facts do not give rise to any substantial question of law.

Summary

Issues:
Challenging the disallowance of bogus purchases under the Income Tax Act, 1961 for Assessment Years 2010-2011 and 2011-2012.

Analysis:
The Appeals under Section 260A of the Income Tax Act challenge the order of the Income Tax Appellate Tribunal partly allowing the Appeals filed by the Revenue regarding the disallowance of purchases. The Respondent was found to have made bogus purchases from Hawala parties, leading to the disallowance of a significant amount by the Assessing Officer. The Commissioner of Income Tax (Appeals) sustained a portion of the disallowance, and the Tribunal further enhanced it to 12.5% of the bogus purchases, emphasizing the need to estimate the profit element. The Tribunal criticized the CIT (A) for blindly applying the gross profit ratio without considering the factual aspect of hawala transactions. The Appellant argued that the Tribunal did not consider evidence and relied on third-party information without allowing cross-examination. However, the Court noted that all authorities found the purchases to be bogus, and the Appellant did not challenge the CIT (A) order before the Tribunal, precluding the raised grievances. Consequently, the Court found no substantial question of law in the extent of disallowance and dismissed the Appeals.

The Court emphasized that the finding of bogus purchases was based on a thorough evaluation of evidence by the authorities, and the Appellant's failure to challenge the CIT (A) order limited the scope of raising new issues before the Tribunal. The Appellant's contention of lack of consideration of evidence and denial of cross-examination was deemed irrelevant due to the Appellant's acceptance of the CIT (A) findings. The Court concluded that the Tribunal's decision was reasonable and did not warrant interference, as the proposed questions did not raise substantial legal issues. Consequently, both Appeals were dismissed, and related Motions seeking a stay of the Tribunal's order were disposed of accordingly.