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2022 (1) TMI 728 - AT - Income TaxEstimation of income - Bogus purchases - HELD THAT - CIT(A) has given a finding that out of disallowance of ₹ 9,04,800/- ₹ 5,04,800/- relating to M/s. Sumeet Sales has already been offered to tax in AY 2012-13 on account of creditors written off. Hence, Ld.CIT(A) has held that the same amount cannot be subject to tax twice. Hence, he has reduced this amount. Thus find that basis of this adjustment is cogent. Nothing contrary has been submitted by revenue. As regards, the rest of the disallowance, note that AO has not doubted the sales. Hence, 100% disallowance is not sustainable on the fact and circumstances of the case. Ld.CIT(A) is correct in disallowing 12.5% of the balance amount. For this proposition, we drew support from Hon ble Bombay High Court decision in Nikunj Eximp Enterprises 2014 (7) TMI 559 - BOMBAY HIGH COURT and Shapoorji Pallonji Co. Ltd 2020 (3) TMI 552 - BOMBAY HIGH COURT - Decided against revenue.
Issues:
1. Deletion of addition on account of bogus purchases without supporting evidence 2. Estimation of profit from Hawala purchases and onus of proof 3. Taxation of amount offered in a different assessment year Issue 1: Deletion of addition on account of bogus purchases without supporting evidence The case involved a dispute regarding the addition of ?9,04,800 as unexplained expenditure due to alleged bogus purchases by the appellant. The Assessing Officer (AO) found that the appellant failed to produce bills, vouchers, or other evidence to support the purchases. Despite opportunities, the appellant did not provide necessary documentation, leading the AO to treat the purchases as unexplained expenditure. The Commissioner of Income Tax (Appeals) noted that the appellant could not prove the purchases from identified parties and had not made payments during the relevant year. However, the appellant claimed to have made a payment later, which was deemed to be from the grey market. The CIT(A) allowed relief of ?5,04,800, considering it offered to tax in a different assessment year. The AO's disallowance was adjusted, and the CIT(A) directed the AO to estimate profit at 12.5% of the alleged bogus purchases, resulting in a reduced addition. Issue 2: Estimation of profit from Hawala purchases and onus of proof The CIT(A) based the estimation of profit on the alleged hawala purchases at 12.5% of the amount, leading to a reduced addition. The CIT(A) emphasized that the appellant failed to prove the purchases from identified parties and did not provide essential documentation. The AO's disallowance was considered under Section 37(1) for expenditure not wholly and solely for business purposes. The ITAT upheld the CIT(A)'s decision, citing precedents and the Bombay High Court's rulings. The ITAT found the 100% disallowance unsustainable due to the lack of doubt on sales by the AO. The burden of proof was on the appellant, who failed to substantiate the purchases, leading to the estimation of profit and a reduced addition. Issue 3: Taxation of amount offered in a different assessment year The dispute also revolved around the taxation of an amount offered in a subsequent assessment year. The CIT(A) considered the amount offered in a different year and granted relief accordingly, stating that the same amount cannot be taxed twice. The ITAT confirmed the CIT(A)'s order, noting the cogent basis for the adjustment and the lack of contrary submissions from the revenue. The ITAT dismissed the revenue's appeal, referencing relevant case laws and clarifications provided by the Bombay High Court. The decision highlighted the importance of avoiding double taxation and upheld the relief granted by the CIT(A). In conclusion, the ITAT upheld the CIT(A)'s order, emphasizing the need for proper documentation and substantiation of expenses, the estimation of profit in disputed transactions, and the avoidance of double taxation on amounts offered in different assessment years. The judgment provided a detailed analysis of the issues involved, supported by legal precedents and clarifications from higher courts.
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