2019 (12) TMI 317 - AT - Income Tax

Reopening of the case - Addition on account of alleged bogus purchases - Although the assessee defended the purchases by filing various documentary evidences, but notices issued u/s 133(6) to confirm the transactions, did not elicit satisfactory response - HELD THAT - There could be no sale without actual purchase of material keeping in view the assessee s nature of business. Undisputedly the assessee was in possession of primary purchase documents and the payments to the suppliers were through banking channels. However, at the same time, the assessee failed to produce any of the suppliers to confirm the transactions. The onus casted upon assessee, in this regard, remained undischarged. Keeping in view the assessee s nature of business, the estimation of 15% as made by Ld. CIT(A) could not be said to be unreasonable from any angle - appeal dismissed - decided against Revenue.

Summary

Issues:
Addition on account of alleged bogus purchases.

Analysis:
The appeal by the revenue for Assessment Year 2009-10 challenges the order of the Ld. Commissioner of Income-Tax (Appeals) regarding addition on account of alleged bogus purchases. The appellant did not appear, and no valid adjournment application was on record, leading to an ex-parte proceeding. The assessee, a resident individual engaged in manufacturing transformers, was assessed for the impugned year with an income of ?7.55 Lacs after addition of alleged bogus purchases worth ?2.00 Lacs. The case was reopened based on information from DGIT (investigation) regarding bogus purchase bills amounting to ?8.01 Lacs from 3 entities. Despite the assessee's defense with documentary evidence, failure to confirm transactions through notices led to estimated additions of 25% of the purchases.

The first appellate authority reduced the estimation to 15%, which the revenue appealed. The Tribunal observed that there could be no sale without actual purchase of material in the assessee's business. Although the assessee had primary purchase documents and made payments through banking channels, the inability to produce suppliers to confirm transactions left the onus undischarged. Given the nature of the business, the estimation of 15% by the Ld. CIT(A) was deemed reasonable. Consequently, the appeal was dismissed, affirming the estimation of income against suspicious purchases made by the assessee.

In conclusion, the Tribunal dismissed the appeal, upholding the estimation of income at 15% due to the failure to discharge the onus of confirming transactions despite possessing primary purchase documents and making payments through banking channels. The decision was based on the nature of the assessee's business and the lack of supplier confirmation, leading to the rejection of the appeal and affirmation of the lower authority's decision.