2024 (6) TMI 1226 - AT - Income Tax

Estimation of income - Bogus purchases u/s 69C - finding of the investigation Wing that party was engaged in providing bogus bills without actual sales - HELD THAT - The amount was outstanding as on 31/3/2010 in the books of the assessee. This sum was paid on 1/10/2010 by the assessee by account payee cheque. Quantity of purchases in the above transaction is shown by the assessee stated to be in closing stock and valued at the same rate. Assessee has stated that it has the closing stock of Rs. 1.35 crores. It is not the claim of the learned assessing officer that the purchases shown by the assessee are not at market rate. It is claimed by the assessee that above amount is also standing in the books of accounts in the closing stock at the same rate. Therefore only the appropriate amount of the gross profit involved in the above transaction needs to be added to the total income of the assessee. As there is no information available with the assessing officer due to non-compliance by the assessee non-compliance before the CIT appeal and also not producing any details except written submission before us we are constrained to adopt 12.5% of the bogus purchases as income of the assessee. Accordingly the AO is directed to restrict an addition of 12.5%. Decided partly in favour of assessee. Set-off of loss as per return of income - claim of the assessee is that such loss should be set off against any income held to be chargeable on account of this bogus purchases in view of CBDT circular number 11 of 2019 - HELD THAT - The circular states that there was an uncertainty on the issue of set off of losses against the income referred to under section 115BBE. As per paragraph number 4 of that circular it was stated that to remove any ambiguity of interpretation set off of any losses was specifically inserted only by the finance act 2016 with effect from 1/4/2017 therefore assessee is entitled to claim set off of loss against income determined under section 115BBE of the act in the assessment year 2016 17. Thus the claim of the assessee is covered by the circular as the impugned assessment year is 2010 11. Accordingly ground of the appeal is allowed.

Summary

Issues:
1. Dismissal of appeal by the National faceless appeal Centre (NFAC) Delhi against the assessment order passed under section 147 read with section 144 of The Income Tax Act, 1961.
2. Upholding the addition of Rs. 980,000 as bogus purchases under section 69C of the act without allowing set off against the loss.
3. Non-compliance by the assessee with notices issued under section 142 (1) and failure to respond to notices served by the assessing officer.

Issue 1: Dismissal of Appeal by NFAC
The appeal was filed by the assessee against the appellate order passed by NFAC Delhi. The NFAC dismissed the appeal against the assessment order passed under section 147 read with section 144 of The Income Tax Act, 1961. The assessee raised grounds stating that the appellate order was wrong, unjustified, and invalid. The CIT (A) upheld the addition of Rs. 980,000 as bogus purchases under section 69C of the act without allowing set off against the loss. The assessee contested this decision, arguing that the purchases were genuine and duly accounted for. However, the NFAC confirmed the addition made by the assessing officer.

Issue 2: Addition of Rs. 980,000 as Bogus Purchases
The assessing officer determined that the assessee paid Rs. 980,000 to M/s Ankita enterprises for bogus purchases. The AO found that the genuineness of the purchases was not proved by the assessee, as there was no evidence of corresponding sales or primary records like sales bills or stock entries. Consequently, the AO passed an assessment order under section 147 read with section 144 of the act, adding Rs. 980,000 to the total income of the assessee. The CIT (A) upheld this addition, stating that the assessee failed to provide information on the genuineness of the purchases.

Issue 3: Non-Compliance with Notices
The assessee did not respond to notices issued under section 142 (1) by the assessing officer. Despite several notices, the assessee did not comply with the requirements. The assessing officer issued further notices to the directors of the company, but no response was received. The lack of cooperation from the assessee led to the assessing officer making the addition of Rs. 980,000 as bogus purchases without allowing set off against the loss.

In conclusion, the appellate tribunal partly allowed the appeal filed by the assessee. It directed the assessing officer to restrict the addition to 12.5% of the Rs. 980,000 bogus purchases made by the assessee. The tribunal also allowed the set off of the loss of Rs. 3,795,790 against the income determined under section 115BBE of the act, in line with CBDT circular number 11 of 2019.