2021 (9) TMI 578 - AT - Income Tax

Estimation of income - Bogus purchases - HELD THAT - For estimation of the gross profit on the alleged bogus purchases we restrict the addition at the rate of 10% - Decided partly in favour of assessee.

Summary

Issues: Delay in filing appeal before Tribunal, Addition on account of bogus purchases, Disallowance based on statement without opportunity to cross-examine, Percentage of profit considered for addition

Delay in filing appeal before Tribunal:
The appeal filed by the assessee was directed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2011-12. There was a delay of 82 days in filing the appeal, which the partner of the assessee attributed to the prevailing Covid-19 Pandemic situation, stating it was not due to any malafide intention or negligence. The Tribunal condoned the delay as there was a sufficient cause for it, and proceeded to dispose of the appeal on merit.

Addition on account of bogus purchases:
The assessee, a partnership firm deriving income from business and profession, had its case reopened under section 148 of the Income Tax Act. The assessment completed under section 143(3) read with section 147 resulted in an addition of &8377; 8,54,993 on account of bogus purchases. The Commissioner (Appeals) restricted the addition to &8377; 1,96,477, considering only the undisclosed profit embedded in the bogus purchases at 22.98%. The Tribunal accepted the alternative contention of the assessee, restricting the addition to 10% of the amount, resulting in relief to the assessee.

Disallowance based on statement without opportunity to cross-examine:
The assessee contended that the disallowance based on a statement recorded from a witness without providing an opportunity to cross-examine was unjust. The Tribunal considered the submission and decided in favor of the assessee, restricting the addition to a lower percentage of profit, providing partial relief.

Percentage of profit considered for addition:
The assessee argued that the percentage adopted by the revenue was excessive and suggested a lower percentage based on turnover and gross profit. The Tribunal accepted the alternative contention, limiting the addition to 10% of the amount, providing part relief to the assessee. The appeal of the assessee was allowed in part, and the order was pronounced in open court on April 12, 2021.