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The judgment involves the addition of Rs. 86,500 in respect of certain purchases made by an unregistered firm, leading to a dispute regarding the genuineness of the transactions and the application of relevant provisions such as s. 145(2) and s. 40A(3). Summary: The appeal before the Appellate Tribunal ITAT Jaipur pertained to the addition of Rs. 86,500 in the assessment for the year 1986-87, based on certain purchase transactions by the assessee firm involving parties with incomplete details and untraceable addresses. The Assessing Officer conducted investigations, including a survey under s. 133A, which revealed discrepancies and non-existence of some parties. The AO invoked s. 145(2) to add the amount of Rs. 86,500 to the total income, considering the purchases as not genuine. The CIT(A) confirmed this addition, emphasizing the spurious nature of the transactions and non-compliance with provisions like s. 40A(3). The assessee contended that the addition should have been limited to the extent of gross profit if the purchases were considered bogus, and raised objections regarding the application of s. 40A(3) without proper notice. The Departmental Representative supported the lower authorities' orders, highlighting the assessee's failure to explain the investigation results. The Tribunal analyzed the implications of bogus entries in accounts, emphasizing the need to remove such entries and concluded that the purchases of Rs. 86,500 were indeed bogus based on the investigations and the assessee's silence. The Tribunal upheld the addition, disregarding the quantitative tally argument and the contention regarding the notice under s. 40A(3). In the final decision, the Tribunal dismissed the appeal, affirming the addition of Rs. 86,500 on account of bogus purchases, as sustained by the CIT(A) based on the findings and circumstances of the case.
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