2008 (10) TMI 61 - HC - Income Tax

Additions made on account that assessee had recorded bogus purchase in his books of accounts - Tribunal reduced additions considering the fact that in the previous year the Gross Profit rate applied was 7.09%, and the same was applied by the learned Commissioner this year also, that was upheld - Revenue could not show as to what material has not been considered by Tribunal, and what irrelevant material has been considered in reducing the additions order of tribunal cannot be vitiated

Summary

Issues:
Challenge to ITAT order on grounds of non-consideration of evidence and irrelevant material.

Analysis:
The appeal before the High Court challenged the ITAT order dated 20.1.2006. The substantial question of law framed was whether the ITAT order was flawed due to the non-consideration of material evidence and the consideration of irrelevant material in reducing the additions made in the accounts of the assessee by the assessing officer. The facts revealed that discrepancies were found in the purchase of raw material and sale of products during the assessment. The assessing officer noted discrepancies in the sale figures provided by the assessee, which were not confirmed by the respective purchasers. The excessive sale was shown by the assessee, leading to additions made by the assessing officer. The assessment order was partially allowed by the learned Commissioner, who reduced the addition.

Both parties appealed to the Tribunal. The Tribunal confirmed the bogus purchases recorded by the assessee to inflate expenses in raw material purchases. The rejection of the books of accounts by the lower authorities was upheld. The determination of the gross profit rate was also considered, with the Tribunal maintaining the previous year's gross profit rate of 7.09% applied by the Commissioner. The Revenue's counsel failed to demonstrate any material not considered by the Tribunal or any irrelevant material considered in reducing the additions. The rejection of the books of accounts due to bogus purchases led to the assessment under Section 145, focusing on determining income through best judgment assessment. The gross sales figures for the year were not disputed, indicating no deflation in the gross sales figures provided by the assessee.

The High Court concluded that the Tribunal had appropriately considered all relevant aspects, including the application of the gross profit rate based on the previous year's rate. It was held that no material evidence was overlooked, and no irrelevant considerations were taken into account by the Tribunal. Consequently, the question framed was answered against the Revenue in favor of the assessee. The appeal was deemed to lack merit and was dismissed.