2024 (7) TMI 1138 - AT - Income Tax

Estimation of income - bogus purchases - HELD THAT - After detailed discussion of the case and the legal position as well as precedents on the subject issue, the Tribunal sustained addition @ 6% of the bogus purchases. The facts of the present appeal are similar and hence, it is squarely covered by the order of the Tribunal in the case of Pankaj K. Choudhary 2021 (10) TMI 653 - ITAT SURAT Therefore, following the above decisions, we restrict the disallowance to 6% of the disputed bogus purchase. Decided in favour of assessee partly.

Summary

Issues:
- Appeal by Revenue against order under section 250 of the Income-tax Act, 1961 for AY 2014-15.
- Dispute over restricting addition made by Assessing Officer on unverifiable purchases.
- Comparison with judgments of other cases and High Court decisions.
- Allegations of bogus purchases and accommodation entries by assessee.
- Assessment of the case by Ld.CIT(A) and subsequent appeal by Revenue before Tribunal.

Analysis:
1. The appeal by the Revenue was against the order passed under section 250 of the Income-tax Act, 1961 for the assessment year 2014-15. The main issue revolved around the addition made by the Assessing Officer on unverifiable purchases, with the Ld.CIT(A) restricting the addition from 100% to 6% of such purchases. The Revenue contended that the purchases were sham transactions fabricated through bogus paper concerns, while citing judgments from other cases and the Hon'ble Gujarat High Court.

2. The case involved allegations of bogus purchases and accommodation entries by the assessee, who was engaged in import, export, and trading of diamonds through M/s Yash Exports. Transactions with entities associated with Bhanwarlal Jain Group were scrutinized during assessment proceedings, revealing non-genuine purchase bills and unsecured loan accommodation entries provided by these entities. The AO added Rs. 1,23,84,050/- as bogus purchases, leading to the assessee's appeal before Ld.CIT(A).

3. Before Ld.CIT(A), the assessee presented submissions and case laws, leading to a remand report from the AO. The Ld.CIT(A) considered various factors, including decisions of the Co-ordinate Bench and the jurisdictional High Court, and restricted the disallowance to 6% of the bogus purchases. The Revenue challenged this decision before the Tribunal, arguing that the assessee debited bogus purchases to suppress profits and that the Ld.CIT(A) failed to appreciate the extensive search conducted by the Revenue.

4. During the Tribunal proceedings, the parties reiterated their positions, with the Revenue supporting the AO's order and the assessee relying on Ld.CIT(A)'s decision. The Tribunal analyzed the case in comparison with a similar case before the Co-ordinate Bench, where a 6% addition was sustained on bogus purchases. The Tribunal found no reason to deviate from the Co-ordinate Bench's decision and dismissed the Revenue's appeal, upholding the restriction of disallowance to 6% of the disputed bogus purchase amount.

5. In conclusion, the Tribunal dismissed the appeal filed by the Revenue, aligning with the decisions of the Co-ordinate Bench and the jurisdictional High Court. The judgment emphasized the importance of considering all relevant factors and legal precedents in determining the extent of disallowance on unverifiable purchases, ultimately maintaining the restriction to 6% in this case.