2022 (5) TMI 160 - AT - Income Tax

Estimation of income - bogus purchases - CIT(A) had restricted the addition 25% - Assessee has not put in appearance to prosecute the appeal - HELD THAT - It can be observed from the order of Ld. Tax Authorities below that the Ld. AO has rightly relied the detailed collection of evidence by the Investigation Wing which stood un rebutted by the assessee and the ld. First Appellate Authority has benefited the assessee under law by restricting addition to 25% so no apparent case of any interferences made out. The appeal is dismissed Ex Parte.

Summary

Issues:
1. Reopening of assessment under section 147 of the Income Tax Act.
2. Addition of income from undisclosed sources due to bogus expenses claimed.
3. Treatment of commission expenses as unexplained expenditure under Section 69C.
4. Appeal against the order passed by the Commissioner of Income Tax (Appeals).

Reopening of Assessment under Section 147:
The appeal was filed against the order passed by the Commissioner of Income Tax Act for the assessment year 2010-11. The Assessing Officer (AO) reopened the case under section 147 of the Income Tax Act based on information received during a Search & Seizure operation in a related case. The AO found that the assessee had reduced its income by claiming bogus expenses on purchases from certain entities, leading to the addition of the amount to the assessee's income from undisclosed sources.

Addition of Income from Undisclosed Sources:
The AO concluded that the assessee had claimed bogus expenses on purchases from specific companies to inflate expenses, resulting in an addition of Rs. 1,39,21,785 to the assessee's total income. Additionally, commission expenses of Rs. 2,78,435 were considered as unexplained expenditure under Section 69C of the Income Tax Act. The Commissioner of Income Tax (Appeals) restricted the addition made by the AO to 25% of the total bogus purchase amount and confirmed the commission expenses.

Treatment of Commission Expenses under Section 69C:
The AO held that the assessee had paid commission for obtaining accommodation entries from undisclosed sources, leading to the addition of Rs. 2,78,435 to the total income. The Commissioner of Income Tax (Appeals) upheld this addition, considering it as unexplained expenditure under Section 69C of the Income Tax Act.

Appeal Against the Order of the Commissioner of Income Tax (Appeals):
The assessee raised multiple grounds of appeal before the Tribunal, challenging the reopening of the case, the additions made by the AO, and the decision of the Commissioner of Income Tax (Appeals). However, as the assessee did not appear for the hearing, the Tribunal dismissed the appeal ex parte, stating that the AO had relied on unrebuted evidence collected by the Investigation Wing, and the Commissioner of Income Tax (Appeals) had already provided relief to the assessee by limiting the addition to 25%. Therefore, no grounds for interference were found, and the appeal was dismissed.