2024 (6) TMI 335 - AT - Income Tax

Estimation of income - bogus purchases - HELD THAT - We find that issue under consideration is covered by the decision of Pankaj K. Chaudhary 2021 (10) TMI 653 - ITAT SURAT wherein the Tribunal has sustained the addition @ 6% of bogus purchases. Since the issue herein is same therefore, following decision and to maintain consistency, we confirm the addition @ 6% of bogus purchases. Hence, we partly allow the appeal of the assessee.

Summary

Issues:
- Disallowance of alleged purchases
- Quantum of addition on bogus purchases

Analysis:
The appeal involved the disallowance of alleged purchases and the quantum of addition on bogus purchases. The assessee, engaged in diamond trading, filed its return for AY 2014-15, declaring nil income. During scrutiny, it was found that the assessee had transactions with entities involved in accommodation entries. The Assessing Officer treated the bill obtained from a group entity as a bogus purchase, adding it to the total income. The Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961. The CIT(A) confirmed the addition at 100% of the total purchases based on information from DGIT, Mumbai. The assessee appealed to the ITAT challenging the addition.

The Authorized Representative argued that the assessee had not taken accommodation entries and provided various documents to prove the genuineness of purchases. The AR contended that since the sales were not doubted, the entire addition should be deleted. Referring to past decisions, the AR suggested sustaining the addition at 6% of bogus purchases. On the other hand, the Senior Departmental Representative supported sustaining the addition, citing previous ITAT decisions upholding a 6% addition for bogus purchases. The ITAT, considering a similar case, upheld the addition at 6% of bogus purchases, maintaining consistency. Consequently, the ITAT partly allowed the appeal, confirming the addition at 6% of bogus purchases.

In conclusion, the ITAT's decision was based on maintaining consistency with past judgments and upheld the addition at 6% of bogus purchases. The appeal was partly allowed in favor of the assessee.