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2021 (6) TMI 314 - AT - Income TaxEstimation of income - bogus purchases - CIT(A) has restricted the addition to 12.5% of the total amount of bogus purchases shown by the assessee as against 25% addition made by the AO - HELD THAT - CIT(A) has restricted the addition by following the ratio laid down by the Hon ble Gujarat High Court in the case of Simit P. Seth 2013 (10) TMI 1028 - GUJARAT HIGH COURT in which it is held that in the cases of bogus purchases, only profit element embedded in the transaction is to be taken into consideration while determining the addition on estimate basis. In our considered view, the findings of the ld. CIT(A) are well reasoned and in accordance with the settled principles of law. We further notice that the facts of the case relied upon by the revenue are different from the facts of the present case. Hence, we do not find merit in the contention of the revenue. We accordingly dismissed the appeal filed by the revenue and uphold the findings of the ld. CIT(A). - Decided against revenue.
Issues:
Appeal against the order of the Ld. Commissioner of Income Tax (Appeals) pertaining to AY 2011-12 restricting addition on account of alleged bogus purchases. Analysis: 1. The assessee declared total income for AY 2011-12 as ?52,06,690. The case was reopened due to alleged accommodation purchase bills of ?25,12,243 from six bogus parties. The assessment under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 determined total income at ?58,35,500 after adding ?6,28,810 under section 69C. 2. The revenue appealed the Ld. CIT(A)'s decision to restrict the addition to 12.5% of the disputed purchase amount. The revenue argued that the parties were found to be Hawala operators as per the Sales Tax Department and the Investigation Wing, thus a reasonable disallowance was made. 3. The revenue challenged the CIT(A)'s decision citing the Hon'ble Gujarat High Court's ruling in N K Protiens Ltd. case, which held that in cases of bogus purchases, the entire amount should be added. The revenue prayed for setting aside the CIT(A)'s order. 4. The appeal hearing took place, but the assessee did not appear. The Tribunal decided to proceed based on the material and the Departmental Representative's submissions. 5. The Departmental Representative argued that the assessee failed to prove the genuineness of the transactions and that the CIT(A)'s decision was not in line with legal precedents. 6. The Tribunal reviewed the case and found that the revenue's grievance was regarding the CIT(A)'s restriction of the addition to 12.5% of the bogus purchases. The CIT(A) based the decision on evidence provided by the assessee and the lack of effort to prove the genuineness of purchases. 7. The CIT(A) justified the restriction by stating that the assessee did not discharge the onus of proving the genuineness of purchases. The CIT(A) referenced reports from the Sales Tax Department and the lack of effort by the assessee to substantiate the transactions. 8. The Tribunal upheld the CIT(A)'s decision, citing the Hon'ble Gujarat High Court's ruling in Simit P. Seth case, which determined that only the profit element from bogus purchases should be considered for additions. The Tribunal found the CIT(A)'s decision well-reasoned and dismissed the revenue's appeal, upholding the CIT(A)'s findings. In conclusion, the Tribunal dismissed the revenue's appeal for AY 2011-12, affirming the CIT(A)'s decision to restrict the addition on account of alleged bogus purchases to 12.5% of the total amount.
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