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2023 (5) TMI 1176 - AT - Income TaxBogus purchases - estimation of income - Sales Tax Department has proved beyond doubt that the parties declared as hawala traders were involved in providing accommodation entry of purchases and the assessee was one of the beneficiary - as per CIT only profit percentage has to be added and estimated @ 6% of bogus purchases - HELD THAT - We find the Jurisdictional Hon ble High Court in the case of Pooja Paper Trading Co. 2019 (3) TMI 62 - BOMBAY HIGH COURT and Simit P Sheth 2013 (10) TMI 1028 - GUJARAT HIGH COURT has considered the profit element and the income was estimated. CIT(A) took a reasonable view that the only profit percentage has to be added and estimated @ 6% of bogus purchases. DR could not controvert the findings of the CIT(A) with any new cogent evidence and material to take a different view. CIT(A) dealt on the facts and considered the profit element in the bogus purchases and also the A.O has not disputed the sales - Decided against revenue.
Issues Involved:
The judgment involves the following Issues: 1. Restriction of addition made on account of bogus purchase. 2. Failure to produce parties for verification. 3. Restriction of addition made by the Assessing Officer. 4. Appreciation of banking channel payments. 5. Appeal covered under CBDT's Circular. Issue 1: Restriction of addition made on account of bogus purchase: The Revenue appealed against the order of the Commissioner of Income-tax (Appeals) regarding the addition made on account of bogus purchases. The Revenue contended that the CIT(A) incorrectly restricted the addition to 6% of total bogus purchases, despite evidence from the Sales Tax Department proving the involvement of hawala traders and the assessee benefiting from accommodation entries. The Revenue sought to reverse the NFAC's order and restore that of the AO. Issue 2: Failure to produce parties for verification: The Revenue argued that the CIT(A) failed to appreciate that the assessee did not produce the parties for verification, despite opportunities provided by the Assessing Officer. This failure was highlighted as a crucial point in the appeal. Issue 3: Restriction of addition made by the Assessing Officer: The AO disallowed alleged bogus purchases by the assessee, leading to an assessment of total income. The CIT(A) restricted the addition to 6% of purchases, citing various legal precedents and considerations. The Revenue challenged this restriction, claiming insufficient information was provided during the assessment proceedings. Issue 4: Appreciation of banking channel payments: The Revenue contended that the CIT(A) erred in appreciating that payments through banking channels were not conclusive evidence, especially since notices were not served on the parties, and the assessee failed to produce them for verification. This aspect of the case was raised as a significant concern. Issue 5: Appeal covered under CBDT's Circular: The appeal was filed under the exception provided in a specific CBDT circular, indicating a procedural aspect that influenced the decision to challenge the CIT(A)'s order. The judgment detailed the background of the case where the assessee, a partnership firm engaged in manufacturing and trading, faced allegations of obtaining bogus purchase entries. The AO, after receiving information and conducting inquiries, reopened the assessment. Despite submissions and attempts to comply with notices, the genuineness of transactions could not be established, leading to disallowance of alleged bogus purchases and an assessment of total income. The CIT(A) upheld the assessment, considering various factors and legal decisions, ultimately restricting the addition made by the AO. The Tribunal, after hearing arguments, found no fault in the CIT(A)'s order and dismissed the Revenue's appeal, affirming the decision pronounced on 24.05.2023.
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