2022 (6) TMI 753 - HC - Income Tax

Estimation of income - bogus purchases - ITAT confirmed the addition to the extent of 15% and the entire purchases should have been taken into account - HELD THAT - As in group appeal 2019 (2) TMI 1632 - BOMBAY HIGH COURT in identical fact situation observed that the purchases could not be rejected without disturbing the sales in case of a trader. After observing as above, this Court dismissed the Appeal. Appellant-Revenue fairly pointed out that this decision will apply to the fact of the present case. In light of the observation of the Division Bench as above, the order passed by the Tribunal cannot be faulted. No question of law, therefore, arises for consideration. Appeal dismissed.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding addition of bogus purchases to total income for Assessment Year 2011-2012.

Analysis:
The Appellant challenged the order passed by the Income Tax Appellate Tribunal, which dismissed the appeal filed by the Revenue regarding the addition of bogus purchases to the total income for the Assessment Year 2011-2012. The Appellant raised a substantial question of law questioning the correctness of confirming the order of the CIT (A) restricting the addition to 15% of the bogus sale instead of the entire amount of bogus purchase. The tax effect involved in the appeal was Rs.1992611, but the Appellant argued that the appeal falls under an exception provided in a relevant CBDT circular, necessitating the appeal to be pressed on merits.

The Respondent-Assessee Company had filed its return declaring income but was found to have obtained bogus purchase bills as per information from the Investigation Wing of the Income Tax Department. The assessment was reopened, and the Assessing Officer added the bogus purchases to the total income. The Commissioner of Income Tax (Appeals) partly allowed the appeal, estimating 15% of the total alleged bogus purchases as meeting the ends of justice. The Income Tax Appellate Tribunal confirmed this order, considering the fact that without any purchase of material, there cannot be any sale, and thus, estimating profit at 15% was appropriate.

In a related case, a Division Bench of the High Court observed that purchases could not be rejected without disturbing the sales in the case of a trader. The Appellant-Revenue acknowledged that this decision applied to the present case, and in light of this observation, the Tribunal's order was deemed correct. Consequently, no question of law arose for consideration, leading to the dismissal of the appeal.

In conclusion, the High Court dismissed the appeal, upholding the Tribunal's decision regarding the addition of bogus purchases to the total income for the Assessment Year 2011-2012.