2019 (12) TMI 255 - AT - Income Tax

Estimation of income - hawala transaction - Reduction of addition made on account of non genuine purchases to 5% - assessment year 2007 08 - HELD THAT - Undisputedly, though, the Assessing Officer had observed that the assessee was not able to prove the genuineness of purchases, however, ultimately, he has estimated profit on such purchases @ 20% for the purpose of making the addition - the learned Commissioner (Appeals) has restricted the addition to 5% of the non genuine purchases. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Reduction of addition made on account of non-genuine purchases to 5%.

Analysis:
The appeal filed by the Revenue challenges an order regarding the assessment year 2007-08. The dispute revolves around the reduction of addition made on account of non-genuine purchases to 5%. The assessee, a partnership firm engaged in trading metals, filed a return declaring income. The Assessing Officer re-opened the assessment due to information received regarding accommodation bills. The AO called for proof of genuineness of purchases, which the assessee failed to provide fully. The AO estimated profit on non-genuine purchases at 20% based on a High Court decision. The first appellate authority restricted the addition to 5% based on Tribunal decisions in previous years of the assessee.

The Departmental Representative argued for restoring the full addition, emphasizing the non-genuineness of purchases. On the contrary, the Authorized Representative supported the 5% addition based on consistent Tribunal decisions in previous years. The Tribunal noted that while the assessee couldn't prove the purchases' genuineness, the AO estimated profit at 20% for the addition. Citing previous Tribunal decisions, the Commissioner (Appeals) restricted the addition to 5%. The Tribunal upheld this decision, considering the profit percentage in the business line and previous rulings in the assessee's case. With no change in facts, the Tribunal upheld the Commissioner's decision, dismissing the Revenue's appeal.

In conclusion, the Tribunal upheld the Commissioner's decision to restrict the addition on non-genuine purchases to 5%, based on consistent Tribunal rulings and the profit percentage in the business line. The Revenue's appeal was dismissed, and the decision was pronounced in open court on 25.10.2019.