2011 (1) TMI 1284 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition on account of bogus purchases.
2. Non-appreciation of inquiries establishing non-existence of suppliers.
3. Deliberate claim of purchase expenses to defraud revenue.
4. Reopening of assessment u/s 147.
5. Addition of 30% of total purchases.
6. Rejection of book results.

Summary:

1. Deletion of Addition on Account of Bogus Purchases:
The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 5,57,722/- for AY 2003-04 and Rs. 21,08,558/- for AY 2004-05 on account of bogus purchases. The CIT(A) observed that 30% of the purchase cost would be a reasonable amount to cover the gains of the appellant.

2. Non-Appreciation of Inquiries Establishing Non-Existence of Suppliers:
The Revenue argued that the CIT(A) failed to appreciate the Department's inquiries, which established that suppliers M/s Girnar Sales Corporation and Shiv Metal Corporation did not exist at the given addresses. The assessee could not produce these parties before the AO or CIT(A) to establish the genuineness of the purchases.

3. Deliberate Claim of Purchase Expenses to Defraud Revenue:
The Revenue claimed that the assessee deliberately claimed purchase expenses in the names of the two non-existent parties, thereby reducing its profit to defraud the revenue of its due taxes. The AO inferred that the purchases from these parties were bogus and rejected the book results u/s 145(3) of the Act.

4. Reopening of Assessment u/s 147:
The assessee's appeal included a ground against the reopening of assessment u/s 147, which was not pressed by the learned AR on behalf of the assessee. Consequently, this ground was dismissed.

5. Addition of 30% of Total Purchases:
The CIT(A) upheld the addition of Rs. 2,39,024/- for AY 2003-04 and Rs. 9,03,667/- for AY 2004-05, being 30% of the total purchases from M/s Girnar Sales Corporation and M/s Shiv Metal Corporation. The CIT(A) referred to several ITAT decisions and concluded that 30% of the purchase cost would be reasonable to cover the gains of the appellant.

6. Rejection of Book Results:
The CIT(A) held that the AO had rejected the book results and made specific additions relating to non-genuine purchases. The assessee failed to establish the genuineness of the purchases, and the CIT(A) upheld the rejection of book results and sustained the addition based on ITAT decisions.

Conclusion:
The Tribunal dismissed the cross appeals of both the Revenue and the assessee for the two assessment years, upholding the CIT(A)'s decision to add 30% of the purchase cost as a reasonable amount to cover the gains of the appellant. The Tribunal found no merit in the grounds raised by both parties and confirmed the rejection of book results and the addition on account of bogus purchases.