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2019 (10) TMI 1122 - AT - Income TaxBogus purchases - CIT(A) restricted the addition to the extent of 25% of the bogus purchase - HELD THAT - The assessee is in the profession of Real Estate Development. It is settled that 100% of the addition is not justifiable. In this regard, we find support of law settled in case CIT Vs.Nikunj Eximpt Enterprises (P) Ltd. 2013 (1) TMI 88 - BOMBAY HIGH COURT . In case CIT Vs. Simit P. Sheth 2013 (10) TMI 1028 - GUJARAT HIGH COURT it is held that the addition is required to be added to the income of the assessee to the extent of income embedded in the bogus purchase. The sale is not disputed. On seeing the facts and circumstances of the case, we are of the view that the addition to the extent of 25% of the bogus purchase is very high, therefore, we restrict the addition of bogus purchase to the extent of 12.5% of the bogus purchase. - Decided in favour of the assessee against the revenue.
Issues involved:
1. Maintainability of the revenue's appeal based on the CBDT circulars. 2. Addition of bogus purchase in the assessee's income. Issue 1: Maintainability of the revenue's appeal based on the CBDT circulars: The Appellate Tribunal, ITAT Ahmedabad, addressed the issue of the revenue's appeal against the order passed by the Commissioner of Income Tax (Appeals)-9, Ahmedabad for the A.Y. 2013-14. The revenue's appeal was challenged on the grounds of the tax effect being less than the monetary limit set by the CBDT circulars. The CBDT circular No. 3/2018 dated 11-7-2018 and Circular no.17/2019 dated 08/08/2019 increased the monetary limit for filing appeals before the Tribunal to ?50,00,000. The Tribunal dismissed the revenue's appeal as not maintainable due to the tax effect being below the specified limit. The decision was influenced by the Co-ordinate bench of ITAT, Ahmedabad, which had previously ruled on the applicability of the circulars to pending appeals. The Tribunal kept open the option for the revenue to file a miscellaneous application if the appeal fell within the exceptions provided in the circular. Issue 2: Addition of bogus purchase in the assessee's income: The assessee filed an appeal against the order passed by the Commissioner of Income Tax (Appeals)-9, Ahmedabad for the A.Y. 2013-14 regarding the addition of bogus purchase to their income. The case involved the assessee's business in Real Estate Development and the identification of bogus dealers during a search action. The AO disallowed the bogus purchase and added it to the assessee's income, which led to the appeal. The CIT(A) restricted the addition to 25% of the bogus purchase amount. The Tribunal, after hearing arguments from both parties, found that the CIT(A)'s decision to confirm the addition at 25% was not justifiable. Citing legal precedents, the Tribunal restricted the addition of the bogus purchase to 12.5% of the total amount. Consequently, the appeal filed by the revenue was dismissed, while the appeal filed by the assessee was partly allowed. In conclusion, the Appellate Tribunal, ITAT Ahmedabad, addressed the issues of the maintainability of the revenue's appeal based on CBDT circulars and the addition of bogus purchase in the assessee's income, providing detailed analyses and legal reasoning for each issue.
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