2021 (9) TMI 879 - AT - Income Tax

Rectification of mistake u/s 254 - NP estimation on turnover - Additions towards Bogus bills for purchase of diamonds - HELD THAT - Net Profit ratio is works out to 0.33% (₹ 1,33,921.90 X 100 / ₹ 4,05,50,960). Further, assessee had declared ₹ 40,45,000/- as excess stock not disclosed in the books of account during the course of survey proceedings U/s. 133A of the Act which has to be treated separately as undisclosed income and therefore, this amount cannot be included while computing the NP ratio of the assessee from its regular disclosed turnover in the books of accounts. Hence, the Net Profit arrived in the order of the Tribunal at 0.33% is in order. Bogus bills for purchase of diamonds and debited in its profit loss A/c for which payments were made through cheques and the same was received back by way of cash and the assessee did not receive the diamonds. In such situation it is obvious that, it is nothing, but a bogus claim of expenditure recorded in the books of accounts of the assessee against which no revenue towards turnover could be attributed. Therefore, estimation cannot be made on the bogus purchases at 8 or 10 % as claimed by the assessee and the entire bogus claim of expenditure has to be disallowed which the Tribunal had correctly dealt with in its order. Hence, there is no mistake apparent on record in the Order of the Tribunal on this issue also - MA filed by the assessee is dismissed.

Summary

Issues:
Rectification of Tribunal order under Section 254(2) of the Income Tax Act, 1961 for A.Y. 2007-08.

Analysis:
The Miscellaneous Application was filed seeking rectification of the Tribunal order dated 17/12/2020 for A.Y. 2007-08. The assessee contended that errors existed in the order, specifically related to the net profit declared and the treatment of excess stock. The key contentions were: (i) The net profit was erroneously stated as 0.33% instead of more than 10% due to admitted profit on account of stock, and (ii) Previous Tribunal orders had estimated profit at 8 to 10% of turnover for similar cases, which should also apply to the assessee's turnover on diamond purchases. The assessee argued that rectifying these mistakes would impact the sustainability of additions made by the Revenue Authorities. However, the Revenue Authorities opposed the rectification, asserting no apparent mistakes in the Tribunal's order.

Upon review, the Tribunal found no apparent mistakes in its order. The Tribunal had considered the particulars provided by the assessee, including sales of gold ornaments and diamonds, to calculate the net profit ratio accurately. The declared excess stock amount was treated separately as undisclosed income, not to be included in the net profit calculation. Regarding the addition for bogus diamond purchases, the Revenue contended that the expenses were unsupported by actual turnover, leading to their disallowance. The Tribunal upheld this decision, emphasizing the inadmissibility of estimating turnover based on bogus claims. Consequently, the Tribunal dismissed the assessee's Miscellaneous Application, deeming it meritless on all grounds.

The Tribunal highlighted the frivolity of such applications, cautioning against wasting time and resources. While refraining from imposing costs in this instance, the Tribunal underscored the need to avoid unnecessary applications that do not serve substantive legal purposes. Ultimately, the Miscellaneous Application filed by the assessee was rejected, with the Tribunal's decision pronounced on August 12, 2021.