9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (10) TMI 307 - AT - Income TaxBogus purchases - assessee has taken accommodation entries of bogus purchases from the benami concerns of Bhanwarlal Jain group, discovered during the course of search - CIT-A restricting the addition to 3% of the total bogus purchases - HELD THAT - In the instant case, there was no search proceeding in the premises of the assessee nor any blank signed cheque book, voucher have been found there was no response to the summons issued by the AO u/s 131 of the Act to the seven parties. The purpose for issuing the summons to the said parties was to establish the genuineness of the purchases. However, we find that as recorded by the AO at para 4.6 of the assessment order, the assessee had filed copy of the ledger accounts, sample bills, bank statements reflecting the above transactions and corresponding sales were provided. We refer to the decisions of the Tribunal in the case of the assessee having similar type of business. In M/s Naitik Gems v. ITO 2017 (11) TMI 1708 - ITAT MUMBAI the assessee was a partnership firm engaged in the business of trading and export of diamonds. The Tribunal has confirmed the profit @ 3% on bogus purchases. We uphold the order of the Ld. CIT(A) - Decided partly in favour of assessee.
Issues Involved:
1. Restriction of addition to 3% of total bogus purchases. 2. Genuineness of purchases. 3. Opportunity to cross-examine suppliers. 4. Reliance on Supreme Court judgment in N.K. Proteins Ltd. case. Detailed Analysis: 1. Restriction of Addition to 3% of Total Bogus Purchases: The Revenue contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in restricting the addition to 3% of the total bogus purchases amounting to ?11,17,20,486/-. The Assessing Officer (AO) received information from the Investigation Wing indicating that the assessee had taken accommodation entries of bogus purchases from the Bhanwarlal Jain group. The AO issued notices and summons to the seven parties involved, but received incomplete responses. Consequently, the AO added the entire amount of ?11,17,20,486/- to the assessee's income. However, the CIT(A) found that disallowing the entire purchases would lead to an impractical gross profit ratio and, considering industry norms and past judgments, restricted the addition to 3% of the bogus purchases. 2. Genuineness of Purchases: The assessee argued that the purchases were genuine, supported by various documents including invoices, bank statements, confirmations from suppliers, stock records, and corresponding sales. Despite these submissions, the AO held that the assessee failed to establish the genuineness of the purchases as the suppliers did not fully respond to notices and summons. The CIT(A) acknowledged the information from the Investigation Wing but found it unreasonable to disallow the entire purchases, instead opting for a 3% addition based on industry practices and previous tribunal decisions. 3. Opportunity to Cross-Examine Suppliers: The assessee contended that no opportunity was given to cross-examine the suppliers, which was a significant procedural lapse. The CIT(A) did not specifically address this issue but focused on the broader context of the case and industry standards to arrive at a 3% addition. 4. Reliance on Supreme Court Judgment in N.K. Proteins Ltd. Case: The Revenue cited the Supreme Court judgment in N.K. Proteins Ltd., where the entire bogus purchases were upheld as additions. However, the Tribunal distinguished the present case from N.K. Proteins Ltd. on the grounds that there was no search proceeding at the assessee's premises, nor were any blank signed cheque books or vouchers found. The Tribunal upheld the CIT(A)'s decision to restrict the addition to 3%, considering it reasonable and in line with similar cases in the diamond trading industry. Conclusion: The Tribunal upheld the CIT(A)'s order restricting the addition to 3% of the total bogus purchases, dismissing both the Revenue's appeal and the assessee's cross-objection. The decision was based on the assessment of industry norms, past tribunal decisions, and the specific circumstances of the case, distinguishing it from the N.K. Proteins Ltd. judgment. The Tribunal found the CIT(A)'s approach reasonable and consistent with the evidence and industry practices.
|
