2019 (9) TMI 1067 - AT - Income Tax

Assessment u/s 153A - addition of bogus purchases - HELD THAT - From the record we found that during these assessment years, the assessee had also paid sales tax alongwith interest thereon. Thus, there is no saving on account of sales tax liability which was alleged to be evaded by having entered into such alleged bogus purchases. Considering quantitative details of goods purchased and sold and had also furnished quantitative reconciliation of goods so purchased and sold, the correctness of which was not doubted by the lower authorities respectfully following the order of the Tribunal in assessee s own case, wherein the facts and circumstances are same, we direct the AO to restrict addition to the extent of 2% of bogus purchases. From the record, we also found that in the A.Y.2008-09, assessee had shown profit of 0.62% on the normal purchases i.e. purchases other than alleged bogus purchases, whereas margin earned in respect of alleged bogus purchases was 0.61%. Thus, we found that there is only difference of 0.01% in the margin shown by the assessee in respect of alleged bogus purchases vis- -vis purchases other than alleged bogus purchases. Similarly, in the A.Y.2010-11 margin earned in respect of normal purchases i.e. purchases other than from alleged bogus purchases is 2.65%, whereas margin in respect of alleged bogus purchases is 1.89%. Thus, the difference in margin is just 0.76%. Thus, we found that upholding the addition to the extent of 2% of bogus purchases will serve the end of justice, which is in consonance with the order passed by the Tribunal in assessee s own case and group concern, as stated above. Since the Tribunal have already upheld the addition to the extent of 2% in respect of purchases made from M/s. Sai International Impex, which purchases was again added by the AO while completing assessment u/s.143(3) r.w.s. 153A, which amounts to double addition. Accordingly, AO is directed to take care of addition already upheld by the Tribunal in respect of purchases from M/s. Sai International Impex

Summary

Issues Involved:
1. Addition on account of alleged bogus purchases.
2. Double addition of purchases from M/s. Sai International Impex.

Detailed Analysis:

1. Addition on account of alleged bogus purchases:
The primary grievance of both the assessee and the revenue pertains to the addition made and partly deleted on account of alleged bogus purchases. Following a search and seizure action on the Ushdev group, evidence indicated that the assessee and its group concerns had taken accommodation entries from various concerns. The Assessing Officer (AO) added the entire amount of purchases totaling ?42,51,60,782/- on the grounds of unsubstantiated claims and lack of proof regarding the genuineness of the purchases.

The Commissioner of Income Tax (Appeals) [CIT(A)] restricted the addition to 12.5% of the Gross Profit (GP) after considering the documents filed by the assessee and various judicial pronouncements. The CIT(A) directed the AO to compute additional profits by adopting a rate of 12.5% for purchases from the alleged bogus suppliers, allowing a set-off of the GP already shown by the assessee.

The Tribunal, upon reviewing the case, noted that the assessee was engaged in trading steel items and had entered into bogus transactions. The assessee submitted quantitative details of purchases and sales, bank statements, and payment details to substantiate the purchases. However, the AO was unsatisfied and added the entire amount of such purchases to the assessee’s income.

The Tribunal considered the order of the CIT(A) and various judicial precedents, including the case of M/s. Sanket Steel Traders and CIT Vs. Simit Sheth. The Tribunal found that the facts of the present case were distinct from those precedents due to differences in business operations and the absence of supplier statements denying the supply of goods.

The Tribunal also reviewed decisions in similar cases, such as Suman Gupta, where disallowance was upheld to the extent of 2% of the alleged bogus purchases. The Tribunal emphasized that the assessee maintained quantitative records, paid VAT, and made payments through account payee cheques, which were properly recorded.

2. Double addition of purchases from M/s. Sai International Impex:
The assessee contended that there was a double addition of ?1,17,13,996/- for purchases from M/s. Sai International Impex. The CIT(A) directed the AO to verify this claim and ensure no double addition occurred.

The Tribunal, referencing its own decision in the assessee’s case for A.Y. 2010-11, where a similar issue was addressed, upheld the addition to the extent of 2% of the bogus purchases. The Tribunal noted that the assessee had shown a consistent GP rate on both normal and alleged bogus purchases, and the difference in margin was minimal.

The Tribunal directed the AO to restrict the addition to 2% of the bogus purchases, aligning with the Tribunal’s previous decision in the assessee’s case and ensuring no double addition for purchases from M/s. Sai International Impex.

Conclusion:
The Tribunal concluded by allowing the assessee’s appeals in part, directing the AO to restrict the addition to 2% of the bogus purchases and ensuring no double addition for purchases from M/s. Sai International Impex. The revenue’s appeals were dismissed. The order was pronounced in the open court on 11/09/2019.