2024 (11) TMI 243 - AT - Income Tax

Estimation of income - bogus purchases - CIT(A) partly allowed the appeal of the Assessee by restricting the addition to 16.5% of amount disallowed by the A.O. as an additional taxable income without giving any benefit of expenses towards the same - HELD THAT - In the absence of any evidences or the argument in contravention of the findings and the conclusion of the Ld. CIT(A), we find no error or infirmity in the order of the Ld. CIT(A). Accordingly, finding no merit in the Grounds of appeal of the Assessee, we dismiss the Grounds of Appeal of the Assessee.

Summary

Issues:
1. Validity of assessment order and additions made.
2. Consideration of purchases as bogus transactions.
3. Addition based on third-party statements.
4. Appreciation of profit percentage assessed by CIT(A).

Analysis:
1. The appeal was filed against the order of Ld.CIT (A)/National Faceless Appeal Centre for the Assessment Year 2010-11. The Assessee contended that the assessment order was invalid, illegal, and void. The Ld. AO made additions by considering purchases as bogus transactions and based on a third-party statement. The Assessee's appeal was partly allowed by the CIT(A), restricting the addition to 16.5% of the disallowed amount without considering expenses. The Tribunal, after hearing the Departmental Representative, upheld the CIT(A)'s decision, dismissing the Assessee's grounds of appeal due to lack of merit.

2. The Ld. CIT(A) upheld additions made by the AO on the grounds of suspicious transactions regarding purchases from specific parties. The AO disallowed purchases and payments made to these parties, treating them as bogus. The appellant provided supporting documents to establish the genuineness of purchases, including ledger extracts, VAT returns, bank statements, and invoices. The AO did not question sales or inventory but raised concerns about the correctness of payments to creditors. The CIT(A) referred to judicial precedents and restricted the addition to 16.5% of the disallowed amount, citing the need to consider the profit element in bogus purchases.

3. The Tribunal reviewed the CIT(A)'s decision and found no error or infirmity in restricting the addition to 16.5% based on judicial pronouncements and the appellant's average GP over five years. Various High Court judgments were cited to support the approach of estimating the profit element in bogus purchases rather than adding the entire amount. The Tribunal dismissed the Assessee's appeal, affirming the CIT(A)'s order. The decision was pronounced on 05th November, 2024, in open court.

This analysis provides a detailed overview of the issues raised in the judgment, the arguments presented by the parties, and the rationale behind the final decision rendered by the Tribunal.