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2021 (6) TMI 577 - AT - Income TaxBogus purchases u/s 69C - CIT deleted the addition - HELD THAT - We find that Ld. CIT(A) has given a reasonable order. Without doubting the sales such disallowances tantamounting to 100% disallowances which is not sustainable on the touchstone of Bombay High court decision in Nikunj Eximp Enterprises Pvt. Ltd. vs. CIT 2014 (7) TMI 559 - BOMBAY HIGH COURT - Hence, we uphold the order of Ld. CIT(A).Hence, we uphold the order of Ld. CIT(A). Appeal by the revenue stands dismissed.
Issues:
1. Addition of bogus purchases 2. Consideration of latest Apex Court Decision 3. Disallowance of purchases made for fixed assets 4. Reasonableness of addition made in original assessment Issue 1: Addition of bogus purchases The appeal by the revenue challenged the deletion of an addition of ?3,19,910 made by the Assessing Officer on account of bogus purchases. The Sales Tax authorities provided information regarding entities involved in providing accommodation bills without supplying goods. The appellant had obtained bogus bills from specific parties, leading to the reopening of the assessment. Despite requests to produce evidence, the appellant failed to verify the transactions' genuineness. The Assessing Officer concluded that purchases were made from undisclosed parties in cash, not from the mentioned parties. The Commissioner of Income Tax (Appeals) deleted the addition, citing a 15% disallowance already done in the original assessment. Issue 2: Consideration of latest Apex Court Decision The second ground of appeal questioned the CIT(A)'s failure to consider the latest Apex Court Decision in the case of N.K. Protein Ltd. vs. DCIT, where a 100% addition was confirmed on account of bogus purchases. The appellant argued for the reversal of the CIT(A)'s order and restoration of the Assessing Officer's decision. However, the CIT(A) found that the original assessment had already included a 15% disallowance, and further additions were not warranted. Citing precedents, the CIT(A) reasoned that only the profit element embedded in the purchases should be disallowed, not the entire amount, leading to the deletion of the addition made by the AO. Issue 3: Disallowance of purchases made for fixed assets During the appellate proceedings, it was argued that purchases made for fixed assets, specifically from one party, should not be subject to addition. Evidence was presented to support this claim, including purchase invoices, bank statements, and VAT audit reports. The CIT(A) verified the contentions and found that the purchases were indeed for fixed assets, not stock in trade. Referring to legal precedents, the CIT(A) held that a 15% disallowance already made in the original assessment was reasonable, and no further addition was necessary. Issue 4: Reasonableness of addition made in original assessment The final issue addressed the reasonableness of the addition made in the original assessment. The CIT(A) explained that the case was reopened based on information received, and purchases were held as bogus. The AO disallowed the entire amount, considering the 15% disallowance in the original assessment. The CIT(A) reviewed the evidence presented during the appellate proceedings and concluded that the addition made by the AO was not justified. The Tribunal upheld the CIT(A)'s decision, emphasizing that disallowances without doubting sales should not amount to 100% disallowances, as per relevant legal precedents. In conclusion, the Appellate Tribunal upheld the decision of the CIT(A) to delete the addition of bogus purchases, considering the reasonable disallowance already made in the original assessment and the nature of the purchases made for fixed assets. The Tribunal dismissed the appeal by the revenue, emphasizing the importance of following legal precedents and maintaining a balanced approach in assessing additions related to questionable transactions.
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