2024 (7) TMI 965 - AT - Income Tax

Estimation of income - bogus purchase - addition of @12.5% of the disputed purchases - HELD THAT - The sales were executed depending on the purchases of materials. In the transaction, the purchases and sales are interlinked during this impugned financial year. We respectfully relied on the order of S.V. Jiwani 2022 (10) TMI 173 - BOMBAY HIGH COURT wherein involving similar set of facts and circumstances of the case, the Hon ble jurisdictional High Court has upheld the decision of the Hon ble ITAT, Mumbai Bench that addition to the extent of @12.5% of the bogus purchases is fair and reasonable. AO had not rejected the sale of assessee but only the purchase. Hence, we direct the ld. AO to restrict the addition @12.5% on bogus purchase.

Summary

Issues:
1. Jurisdiction under section 147 of the Income-tax Act.
2. Validity of addition made under section 69C of the Act.
3. Merits of the disallowance of alleged bogus purchases.
4. Restriction of disallowance based on ITAT and high court decisions.
5. Consideration of submissions made before the authority.

Jurisdiction under section 147 of the Income-tax Act:
The appeal was against the order of the Ld. Commissioner of Income Tax, challenging the assumption of jurisdiction under section 147 of the Act by the Assessing Officer (AO). The Revenue contended that the jurisdiction was not rightly assumed by the AO. The Tribunal considered the facts where the AO added Rs. 22,20,594 on account of bogus purchases made by the assessee based on information from the Directorate of Investigation. The AO issued a notice under section 148 of the Act, leading to the appeal. The Tribunal analyzed the grounds raised and ultimately directed the AO to restrict the addition to 12.5% of the disputed purchases, citing precedents and quashing the original addition.

Validity of addition made under section 69C of the Act:
The validity of the addition made under section 69C of the Act was a crucial issue in the appeal. The assessee argued for a restriction of the addition to 12.5% of the disputed purchase amount, emphasizing that transactions were through banking channels and supported by proper documentation. The Tribunal reviewed the arguments presented by both parties and relied on the relevant facts and legal precedents to allow the appeal and restrict the addition to Rs. 277,574, considering the interlinked nature of purchases and sales during the financial year.

Merits of the disallowance of alleged bogus purchases:
The appeal also involved a challenge to the merits of the disallowance made by the AO regarding alleged bogus purchases of Rs. 22,20,594. The Tribunal considered the evidence presented, including invoices and ledger accounts, but found that the appellant failed to provide sufficient third-party evidence to substantiate the genuineness of the transactions. The Tribunal upheld the AO's action, emphasizing that mere furnishing of invoices did not establish the authenticity of the transactions.

Restriction of disallowance based on ITAT and high court decisions:
Another issue raised in the appeal was the restriction of the disallowance based on decisions of the ITAT and high courts. The Tribunal referenced a case involving similar facts and circumstances where the High Court upheld the decision to restrict the addition to 12.5% of the bogus purchases. Relying on this precedent, the Tribunal directed the AO to limit the addition to Rs. 277,574, quashing the original addition amount of Rs. 22,20,594.

Consideration of submissions made before the authority:
The final issue involved the consideration of submissions made before the authority. The appellant argued for the annulment of the assessment order or alternative relief. The Tribunal carefully reviewed the submissions, arguments, and evidence on record to make a decision in favor of the appellant, allowing the appeal and restricting the addition on the disputed purchases. The Tribunal emphasized the importance of adhering to legal precedents and ensuring a fair and reasonable outcome in tax matters.

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