2021 (3) TMI 505 - AT - Income Tax

Estimation of income - bogus purchases - CIT-A confirmed the addition to to 12.5%- HELD THAT - In different trade items, there may be different rate of profit. Whenever any profit is being estimated, the element of guesswork would always be involved. In the case Simit P. Sheth 2013 (10) TMI 1028 - GUJARAT HIGH COURT on an analysis of the material, Tribunal drew an inference that in the trade of steel profit at the rate of 12.5% may be reasonable profit when the assessee has procured material from different sources and bills from different sources. This formation of opinion was not disturbed by the Hon ble High Court. Therefore, no infirmity in the order passed by the Ld.CIT(A) in restricting the addition to 12.5% as against the entire bogus purchases disallowed by the Assessing Officer. Grounds raised by the revenue are dismissed.

Summary

Issues involved:
Revenue's appeal against order restricting addition to 12.5% of bogus purchases disallowed by Assessing Officer for A.Y. 2009-10.

Analysis:
1. Factual Background: The assessee, engaged in manufacturing and trading chemicals, filed income tax return for A.Y. 2009-10. Assessing Officer reopened assessment based on information from Sales Tax Department about accommodation entries by various dealers, including the assessee. The AO treated purchases from M/s. Surat Tube Corporation as non-genuine.

2. Assessing Officer's Findings: The AO believed that the assessee obtained accommodation entries without actual goods delivery, possibly from the gray market. The AO found lack of evidence linking purchases to consumption in production, treating ?59,467 as non-genuine and bogus.

3. Commissioner's Decision: The CIT(A) restricted the addition to 12.5% of alleged bogus purchases after considering submissions and evidence. The assessee argued that the purchase was debited to Plant and Machinery Account, not claimed as deduction, supporting the CIT(A)'s decision.

4. Appellate Tribunal's Analysis: The ITAT Mumbai upheld the CIT(A)'s decision, citing the Gujarat High Court's judgment in a similar case. The ITAT agreed that the assessee failed to prove the purchases' genuineness, not producing parties or essential documents like delivery challans, weighment slips, etc. The ITAT found no fault in restricting the addition to 12.5% of the alleged bogus purchases.

5. Conclusion: The ITAT dismissed the revenue's appeal, affirming the CIT(A)'s decision to limit the addition to 12.5% of the bogus purchases. The ITAT found no errors in the CIT(A)'s reasoning and upheld the decision based on the available evidence and legal precedents.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive overview of the case and the decisions made at each stage of the proceedings.