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2021 (1) TMI 1067 - AT - Income TaxEstimation of income - bogus purchases - CIT-A restricted the addition to 17% of the bogus purchases - HELD THAT - CIT(A) has based his findings on the decision of the coordinate Bench, rendered in the case of M/s. Hotel Mayfair Pvt. Ltd., 2015 (7) TMI 1365 - ITAT MUMBAI a group company of the present assessee in appeal filed by the assessee against the order passed by the Ld. CIT u/s. 263 of the Act, in which the AO had made addition of 17% of the total amount of bogus purchases. Thus we do not find any reason to interfere with the findings of the Ld. CIT(A). - Decided against revenue.
Issues Involved:
1. Reopening of assessment under Section 147 of the Income Tax Act. 2. Addition of amounts for bogus purchases. 3. Application of Gross Profit (GP) rate on bogus purchases. 4. Disallowance on account of depreciation for capitalized unverifiable purchases. Detailed Analysis: 1. Reopening of Assessment under Section 147: The assessee challenged the reopening of assessment orders under Section 147, arguing that all details regarding purchases were previously submitted, and reopening amounted to a change of opinion, which is not permissible under law. The CIT(A) dismissed this legal ground, allowing the reassessment to proceed. 2. Addition of Amounts for Bogus Purchases: The Assessing Officer (AO) reopened the assessments based on information that the assessee had obtained fake purchase bills from bogus parties. The AO made additions of the entire amounts of these bogus purchases to the income of the assessee. The CIT(A) restricted the addition to 17% of the bogus purchases, based on the decision in the case of M/s. Hotel Mayfair Pvt. Ltd., a group concern of the appellant company, where a similar addition was sustained. 3. Application of Gross Profit (GP) Rate on Bogus Purchases: The revenue challenged the CIT(A)'s decision to restrict disallowance to 17% of the bogus purchases, arguing for a 100% disallowance based on precedents like N.K. Proteins Ltd. and Pawanraj B. Bokadia. However, the CIT(A) and the Tribunal upheld the 17% GP rate, considering it fair and reasonable in the context of the hotel business and in line with previous judicial pronouncements, including the Hon'ble ITAT Mumbai's decision in the case of M/s. Hotel Mayfair Pvt. Ltd. 4. Disallowance on Account of Depreciation for Capitalized Unverifiable Purchases: The CIT(A) also addressed the issue of unverifiable purchases that were capitalized. It was held that the amount of depreciation claimed on such capitalized assets needed to be disallowed. The CIT(A) provided a detailed calculation of the disallowance for each assessment year, confirming a total disallowance of ?21,30,322 for the current year under consideration. Conclusion: The Tribunal upheld the CIT(A)'s orders, confirming the application of a 17% GP rate on bogus purchases and the disallowance of depreciation on capitalized unverifiable purchases. The appeals filed by the revenue were dismissed, and the cross-objections filed by the assessee were dismissed as not pressed. Order Pronouncement: The order was pronounced on 30th December 2020 under rule 34(4) of the Income Tax Appellate Tribunal Rules, 1963.
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