2021 (12) TMI 1080 - AT - Income Tax

Estimation of income - bogus purchases - HELD THAT - Assessee was indulged in obtaining accommodation entries/ bogus purchases and had not cooperated before the A.O. by providing the relevant details, some addition has to be made. However, 25% of the bogus purchases estimated by the Ld. CIT(A) under the facts and circumstances of this case appears to be on higher side - restrict the same to 12.5% of the bogus purchases made by the assessee which is to be added to the total income of the assessee. Thus, the order of the Ld. CIT(A) is modified and addition is restricted to 12.5% of the bogus purchases - Decided in favour of assessee in part .

Summary

Issues:
Validity of re-assessment proceedings
Merits of the case regarding the addition of bogus purchases
Confirmation of the addition by the Ld. CIT(A)

Validity of re-assessment proceedings:
The case involved the assessee being engaged in bogus purchases/accommodation entries, leading to the reopening of the assessment by the Assessing Officer (A.O.) under section 147 of the I.T. Act, 1961. The Ld. CIT(A) upheld the validity of the re-assessment proceedings, citing precedents from the Tribunal and High Courts. The Ld. CIT(A) also considered the merit of the case and restricted the addition to 25% of the total bogus purchases, deleting a significant portion of the addition made by the A.O.

Merits of the case regarding the addition of bogus purchases:
The assessee challenged the addition of &8377; 1,36,093/- on account of purchases treated as bogus under section 69C of the Income Tax Act. The Ld. CIT(A) confirmed this addition but restricted it to 25% of the total bogus purchases. The assessee raised multiple grounds challenging this addition, including the contention that the firms involved were engaged in actual business activities. The Ld. CIT(A) and the A.O. considered statements and evidence from various parties involved in issuing bogus bills, leading to the decision to sustain a portion of the addition.

Confirmation of the addition by the Ld. CIT(A):
The Tribunal considered arguments from both sides and reviewed the orders of the A.O. and the Ld. CIT(A). The Tribunal noted that the assessee had obtained bogus bills from specific trading companies, leading to the addition of &8377; 5,44,392/- to the total income. The Tribunal agreed that some addition was warranted due to the lack of cooperation from the assessee and the nature of the transactions. However, the Tribunal found the 25% addition by the Ld. CIT(A) to be on the higher side and reduced it to 12.5% of the bogus purchases, resulting in a restricted addition of &8377; 68,049/-. The Tribunal partly allowed the grounds raised by the assessee, modifying the order of the Ld. CIT(A) accordingly.

In conclusion, the Tribunal partially allowed the appeal of the assessee, modifying the addition of bogus purchases and providing detailed reasoning for the decision.