2020 (8) TMI 264 - AT - Income Tax

Estimation of income - Addition u/s 69C - self made vouchers - assessee had failed to discharge the onus to establish the genuine of the transactions and also failed to furnish corroborative evidences in support of his claim - HELD THAT - As directed the AO to estimate gross profit of 10% to 15% on total alleged bogus purchases. Considering the nature of business of the assessee the AO has made 100% addition, whereas the CIT(A) has scaled down addition to 12.50% profit on alleged bogus purchases. Although, both authorities have taken different rate of profit for estimation of income from alleged bogus purchase, but no one could support said rate of gross profit with necessary evidences or any comparable cases. We are of the considered opinion that 12.50% rate of profit adopted by the CIT(A) appears to be reasonable and accordingly, we are inclined to uphold the findings of the CIT(A) and reject grounds taken by the Revenue. Adhoc disallowances of various expenses - CIT(A) has recorded categorical findings that the AO has not given any specific reason for making adhoc disallowances of expenses - HELD THAT - Revenue fails to bring on record any evidences to prove the findings of facts recorded by the CIT(A) is incorrect. Therefore, we are of the considered view that there is no error in the findings of the CIT(A) and hence, we are inclined to uphold order of the ld. CIT(A) and reject ground taken by the Revenue. Appeal filed by the Revenue is dismissed.

Summary

Issues:
- Appeals filed by Revenue against orders of Ld. Commissioner of Income tax for AY 2009-10 and 2010-11.
- Dispute over addition made by AO on account of alleged bogus purchases and ad-hoc disallowance of expenses.
- Assessment of total income and subsequent appeal by assessee.
- Consideration of evidences and arguments by Ld.CIT(A) and ITAT Mumbai.
- Decision on the rate of profit to be adopted for estimation of income from alleged bogus purchases.
- Deletion of ad-hoc disallowances of expenses by Ld.CIT(A).

Detailed Analysis:
1. The appeals filed by Revenue were directed against identical orders of the Ld. Commissioner of Income tax for AY 2009-10 and 2010-11, involving common grounds of appeal. The ITAT Mumbai heard and disposed of both appeals together due to the identical nature of facts and issues.

2. The primary issue revolved around the addition made by the AO on account of alleged bogus purchases and the ad-hoc disallowance of expenses. The Ld.CIT(A) had scaled down the addition to 12.5% profit on the alleged total bogus purchases, citing the failure of the assessee to provide conclusive evidence. The ITAT Mumbai upheld this decision, considering the lack of necessary evidence from both sides.

3. The assessee, a Partnership Firm engaged in manufacturing engineering goods, had filed its return for AY 2009-10, which was subsequently reopened under section 147 based on information regarding accommodation bills of bogus purchases. The AO made a 100% addition on alleged bogus purchases, which was reduced to 12.5% by Ld.CIT(A) based on the submission of necessary evidences by the assessee.

4. Despite the absence of the assessee during the proceedings, the ITAT Mumbai analyzed the arguments presented by the Ld. DR and the material on record. The decision was based on the failure of both parties to conclusively prove the genuineness of the purchases, with the AO relying heavily on information from investigation wings and Sales Tax Department.

5. The ITAT Mumbai considered the rate of profit to be adopted for estimating income from alleged bogus purchases, referring to previous cases where a profit element was taxed instead of the total purchase amount. The decision to uphold the 12.5% rate of profit set by Ld.CIT(A) was based on the nature of business and lack of supporting evidence for any other rate.

6. Another issue addressed was the deletion of ad-hoc disallowances of expenses amounting to &8377;30,000 by Ld.CIT(A). The ITAT Mumbai found no error in the findings of Ld.CIT(A) and upheld the decision, as the Revenue failed to provide any evidence to challenge the findings.

7. The ITAT Mumbai dismissed the appeals filed by Revenue for both AY 2009-10 and 2010-11, upholding the orders of Ld.CIT(A) in both cases based on the detailed analysis and lack of substantial evidence provided by the parties.