2024 (11) TMI 913 - AT - Income Tax

Bogus purchases - estimation of profit - AR submitted that the assessee has made purchases after due verification of the bonafides of the GST Registration of the impugned two suppliers - HELD THAT - Where the related sales were accepted, the amount of bogus purchases in its entirety cannot be added to the returned income and only certain percentage of profit embedded in such tainted purchases is to be added as additional income and further, the estimation of profit is over and above the profit already declared by the assessee in the return of income, we feel appropriate to arrive at the profit margin of 10% on the bogus purchases and thus, addition to the extent/partly is deleted. Thus, appeal of the Revenue is dismissed.

Issues Involved:

1. Deletion of addition on account of alleged bogus purchases.
2. Levy of interest under sections 234A, 234B, and 234C.
3. Initiation of penalty proceedings under section 270A.
4. Non-grant of TCS credit and regular tax payment.
5. Levy of tax under section 115BBE.

Detailed Analysis:

1. Deletion of Addition on Account of Alleged Bogus Purchases:

The primary issue concerns the deletion of additions made by the Assessing Officer (AO) regarding alleged bogus purchases from two parties, Jawahar Lal Shah and Daya Nand Maruti Phalke, amounting to Rs. 8,21,27,860/-. The AO had disallowed these purchases on the grounds of discrepancies and lack of evidence proving the actual supply of goods. The Commissioner of Income Tax (Appeals) [CIT(A)] partially allowed the appeal by estimating an additional profit margin of 15% on these purchases, thereby confirming an addition of Rs. 1,23,19,179/- and deleting Rs. 6,98,08,681/-.

The Tribunal upheld the CIT(A)'s decision, noting that the assessee had provided documentation such as invoices, E-way bills, and payments through banking channels, and that the sales were not disputed by the AO. The Tribunal referenced similar cases, emphasizing that only the profit element embedded in such purchases should be added to the income, not the entire purchase amount. The Tribunal further reduced the profit margin to 10%, confirming an addition of Rs. 82,12,786/- and deleting Rs. 7,39,15,074/-.

2. Levy of Interest Under Sections 234A, 234B, and 234C:

The appellant contested the levy of interest under sections 234A, 234B, and 234C, arguing it was against the provision of law. The CIT(A) noted that the levy of interest is consequential and mandatory, as held by the Supreme Court in the case of M.H. Ghaswala. Consequently, the CIT(A) directed the AO to allow consequential relief, and this ground was partly allowed.

3. Initiation of Penalty Proceedings Under Section 270A:

The initiation of penalty proceedings under section 270A was challenged by the appellant. The CIT(A) dismissed this ground, stating that the initiation of penalty proceedings is premature and no appeal lies against such initiation.

4. Non-Grant of TCS Credit and Regular Tax Payment:

The appellant claimed that the AO did not grant credit for TCS of Rs. 53,867/- and regular tax payment of Rs. 49,30,410/-. The CIT(A) dismissed this ground due to the appellant's failure to provide evidence or make submissions during appellate proceedings. The 26AS statement did not reflect any credit for TCS or regular tax payment.

5. Levy of Tax Under Section 115BBE:

The appellant raised an additional ground regarding the levy of tax under section 115BBE, but failed to provide evidence supporting this claim. The CIT(A) noted that the AO did not record any finding about the levy of tax under section 115BBE in the assessment order, and thus dismissed this ground.

Conclusion:

The Tribunal dismissed the appeal of the Revenue and partly allowed the appeal of the assessee, confirming a reduced addition on account of bogus purchases. The cross-objection filed by the assessee was dismissed as infructuous. The order was pronounced on 18th October, 2024.

← Previous Next →