2024 (5) TMI 297 - AT - Income Tax

Estimation of income - bogus purchases - whether the AO is justified in making 100% addition of the bogus purchase amount or he should have added only the profit margin earned by the assessee? - HELD THAT - The Hon ble Gujarat High Court in the case of N.K. Industries Ltd. 2016 (6) TMI 1139 - GUJARAT HIGH COURT has held that once it comes to a categorical finding that the amount represents alleged bogus purchases from bogus suppliers it is not incumbent to restrict the disallowance and thereby directed to make addition of 100% of the alleged bogus purchases. The SLP preferred by the assessee against this decision of the Hon ble High Court has been dismissed by the Hon ble Supreme Court 2017 (1) TMI 1090 - SC ORDER . We find that the First Appellate Authority has followed this decision of the Hon ble Gujarat High Court. As no distinguishing decision has been brought to our notice in favour of assessee, we do not find any reason to interfere with the findings of the Ld. CIT(A). Appeal filed by the assessee is dismissed.

Summary

Issues involved: Appeal against addition of Rs. 63,70,738 as bogus purchases, failure to produce supporting documents, challenge to the addition u/s 250 of the IT Act, and request to delete the addition confirmed by CIT (A).

Addition of Bogus Purchases:
The appeal was made against the order confirming the addition of Rs. 63,70,738 as bogus purchases. The Assessing Officer found that the assessee failed to provide necessary documents for the purchases, leading to the conclusion that the purchases were non-genuine. The appellant argued that only the profit margin should have been added, pointing out that the profit margin for the year was around 1.35%. However, the authorities upheld the addition based on the lack of evidence to establish the genuineness of the transactions. Citing a decision of the Hon'ble Gujarat High Court, it was held that in cases of alleged bogus purchases, the addition of 100% of the amount is justified. As no favorable decision was presented, the appeal against the addition was dismissed.

Challenge u/s 250 of the IT Act:
One of the grounds raised was the challenge to the order u/s 250 of the IT Act, objecting to the Assessing Officer's failure to issue valid notices u/s 143(2)/142(1). The counsel stated that these issues were not pressed and thus were dismissed. The failure to address this ground in the order was highlighted, emphasizing the legal nature of the objection. However, since the issues were not pressed, they were not considered further in the judgment.

Request to Delete Addition Confirmed by CIT (A):
The appellant requested the deletion of the addition confirmed by the CIT (A). Despite the arguments presented by the appellant regarding the profit margin and the lack of evidence to support the bogus purchases, the authorities upheld the addition based on the information received from the Sales Tax Department. The request for deletion was not accepted, and the appeal was ultimately dismissed by the Tribunal.