2022 (7) TMI 791 - AT - Income Tax

Estimation of income - Bogus purchases - HELD THAT - In this case the assessee has filed the order of learned CIT(A) in assessee s own case for A.Y. 2007-08 wherein learned CIT(A) has held that AO has analyzed the transaction through assessment order and established that there was no genuine purchase of the diamond and estimated profit @12.5 % in the case of the Hon ble Gujarat High Court in the case of Smith P. Sheth 2013 (10) TMI 1028 - GUJARAT HIGH COURT Since, above order has been filed by the AR in support of his argument, therefore, we direct the AO to estimate the profit @12.5% amounting to Rs.5,18,803/- which was treated as bogus purchase on the basis of plethora of judgments. It has been held only profit can be added to the income of the assessee. In view of the above, appeal of the assessee is partly allowed.

Summary

Issues:
Delay in filing appeal before the Tribunal, Addition of Rs.5,18,803 as bogus purchase from M/s. Sparsh Exports Pvt. Ltd., Admission of additional evidence under Rule 46A, Dismissal of appeal by CIT(A), Appeal before ITAT against CIT(A) order.

Delay in Filing Appeal:
The appeal was delayed by 31 days, attributed to an inadvertent mistake by the assessee in forwarding details to their AR. The Tribunal condoned the delay, considering it minor and acceptable to proceed with the appeal.

Addition of Bogus Purchase:
The case involved reopening under Section 147 due to alleged bogus purchases from M/s. Sparsh Exports Pvt. Ltd. The AO made the addition of Rs.5,18,803 as the assessee did not comply with the notice and failed to provide necessary details or appear before the AO. The CIT(A) confirmed the addition, leading to the appeal before the ITAT.

Admission of Additional Evidence:
The assessee submitted additional evidence under Rule 46A, arguing they were deprived of submitting crucial evidence during the assessment proceedings. Citing judicial precedents, the assessee contended that principles of natural justice should allow admitting additional evidence. The AR rebutted the remand report, clarifying the facts and requesting deletion of the addition based on lack of justification.

Dismissal of Appeal by CIT(A):
After considering the documents and remand report, the CIT(A) dismissed the appeal. The ITAT reviewed the impugned order, remand report, and available materials. The AO and CIT(A) had analyzed the transaction, and the ITAT directed the AO to estimate profit at 12.5% on the amount treated as bogus purchase, based on previous judgments. The appeal was partly allowed by the ITAT.

Appeal Before ITAT:
The assessee approached the ITAT against the CIT(A) order through a second statutory appeal. The ITAT's decision to partially allow the appeal was based on estimating profit rather than the entire amount as a bogus purchase, in line with legal precedents.

This comprehensive analysis covers the issues of delay in filing the appeal, the addition of a bogus purchase, admission of additional evidence, dismissal of the appeal by CIT(A), and the final decision by the ITAT.