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2024 (6) TMI 1286 - AT - Income TaxEstimation of income - bogus purchases from non-existent vendor s - CIT(A) restricting the disallowance to 25% of purchases - HELD THAT - AO has made the addition of 100 percent of the bogus purchases as addition to the income of the assessee by invoking the provisions of section 69C of the act despite the assessee showing the purchase invoices, name, and address of the parties, producing the books of accounts, payments made by the banking channel. Merely because the notices issued to the supplier u/s 133 (6) could not be served by the AO and further the assessee failed to produce the owner of M/s Rishabh Enterprises the learned assessing officer made the addition to the extent of hundred percent of such bogus purchases. CIT-A upon the decision of M/s Vijay Proteins Limited 2015 (1) TMI 828 - GUJARAT HIGH COURT retained the addition only to the extent of 25% of bogus purchases. We find that in the case of NK proteins 2016 (6) TMI 1139 - GUJARAT HIGH COURT followed the decision of M/s Vijay Proteins Ltd and further in both the cases the addition was restricted to the extent of 25% of the bogus purchases only. Therefore, the grounds of appeal preferred by AO are misplaced - no infirmity in the order of the CIT A in restricting the addition of bogus purchases to the extent of 25% of such bogus purchases. Appeal of revenue dismissed.
Issues:
Appeal against assessment order for AY 2010-11 - Disallowance of purchases from non-existent vendors - Discrepancy in disallowance percentage - Application of section 69C - Compliance with legal procedures - Validity of CIT-A's decision. Analysis: The appeal was filed by the Income Tax Officer against the appellate order passed by the National Faceless Appeal Centre for the assessment year 2010-11. The assessing officer contested the decision of the CIT-A, arguing that the disallowance of purchases from non-existent vendors should have been 100% instead of the 25% allowed by the CIT-A. The assessing officer relied on a Gujarat High Court case and a Supreme Court decision to support the contention that entire purchases should be disallowed in such cases. The assessee, an individual, had filed the return of income for the relevant assessment year. The assessing officer received information from the GI (Investigation) regarding hawala transactions involving the assessee. The assessing officer issued notices under relevant sections and conducted inquiries. The assessing officer found discrepancies in the documentation provided by the assessee, including failure to produce certain relevant documents and individuals for verification. Consequently, the assessing officer added 100% of the alleged bogus purchases to the assessee's income. Upon appeal, the CIT-A relied on a decision of the Gujarat High Court in a similar case to restrict the disallowance to 25% of the purchases. The assessing officer challenged this decision, citing a different Supreme Court judgment. The tribunal noted that the assessing officer had made the addition without sufficient justification, considering that the assessee had provided some documentation and details regarding the transactions. The tribunal upheld the CIT-A's decision based on the precedent set by the Gujarat High Court and the principle of restricting the disallowance to 25% of the bogus purchases in such cases. The tribunal dismissed the assessing officer's appeal, emphasizing that the CIT-A's decision was in line with established legal principles and previous judgments. The tribunal found no fault in the CIT-A's order and upheld the restriction of the disallowance to 25% of the alleged bogus purchases.
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