2021 (3) TMI 785 - AT - Income Tax

Estimation of income - Bogus purchases - HELD THAT - In the instant case the notice u/s 133(6) issued by the AO to the concerned parties in the address given by the assessee were returned un-served by the postal authorities with the remarks not known or no such address or left . Thereafter, the AO asked the assessee to product those parties before him to verify the genuineness of the transactions. The assessee failed to do so. It is recorded by the AO, that the assessee filed before him (i) copy of ledger accounts along with copy of purchase invoices of the specified parties, (ii) copy of bank statements evidencing payments made through proper banking channels by issuing account payee cheques in respect of all the parties, highlighting the relevant entries, (iii) chart showing the details of purchases of the alleged parties and (iv) details in respect of purchases from the abovementioned parties and the corresponding sales. As recorded by the AO, the assessee failed to file before him documents such as delivery challans, transport receipts, octroi receipts for payment of octroi duty, receipt of weighbridge for weighing of goods, excise gate pass, goods inward register. Considering the above facts and circumstances of the case and keeping in mind the nature of business of the assessee which is trading in ferrous and non-ferrous metals, we are of the considered view that estimating the profit @ 6% on the disputed purchases would be proper. Therefore, we set aside the order of the Ld. CIT(A) and direct the AO to estimate the profit @ 6% on the disputed purchase.

Summary

Issues:
- Confirmation of addition on alleged bogus purchases
- Dismissal of plea for withdrawal of penalty proceedings under section 271(1)(c)

Confirmation of Addition on Alleged Bogus Purchases:
The case involved an appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals) regarding alleged bogus purchases in the assessment year 2009-10 under section 143(3) read with section 147 of the Income Tax Act, 1961. Despite multiple hearing dates, the assessee did not appear, leading to the disposal of the appeal based on available materials and the Departmental Representative's input. The assessee contested the addition of ?12,95,807 on alleged bogus purchases, arguing that the Assessing Officer's opinion lacked material evidence and was based on presumptions. The CIT(A) upheld the addition, noting the absence of current vendor addresses and failure to produce vendors before the Respondent. The AO's decision was influenced by the Sales Tax Department's inquiries and the lack of essential documents like delivery challans and weighbridge receipts. Following the Gujarat High Court judgment, the AO estimated a profit margin of 12.5% on disputed purchases, resulting in the addition amount.

Dismissal of Plea for Withdrawal of Penalty Proceedings:
The assessee's plea for withdrawing penalty proceedings under section 271(1)(c) was dismissed by the CIT(A). The assessee's return of income for the relevant year declared a total income of ?7,17,370, primarily from trading in ferrous and non-ferrous metals. The AO reopened the assessment based on information from the Sales Tax Department about alleged bogus purchase bills. Despite efforts to verify the transactions' genuineness, including issuing notices and requesting the presence of disputed parties, the AO found the evidence provided insufficient. The CIT(A) directed the AO to compute additional profits from alleged bogus suppliers at a rate of 12.5%, offsetting the GP shown in regular books. However, the Tribunal, considering the nature of the business and the lack of essential documents, reduced the estimated profit margin to 6%, resulting in a revised addition of ?6,21,990. The appeal was partly allowed based on this adjustment.

This detailed analysis of the judgment addresses the issues of confirmation of addition on alleged bogus purchases and the dismissal of the plea for withdrawal of penalty proceedings, providing a comprehensive overview of the legal proceedings and decisions involved.