2016 (4) TMI 948 - AT - Income Tax

Bogus purchases - Held that - After going through the factual matrix and understanding them in the right perspective, in our considered opinion, the assessee has made purchases directly from the producers/agriculturists who are termed as unregistered dealers (URD) which means that the materials have actually been purchased by the assessee but without any supporting document. The statement of the assessee is also correct because there are no bogus purchases of goods but only supporting accommodation bills are bogus. There is no denying that there is a physical movement of goods- purchases as well as sales. In fact, there is not even a whisper of any bogus sales, neither by the Assessing Officer nor by the First Appellate Authority. This may be a case of purchases supported by bogus accommodation bills but at the same time, we cannot say that there were no purchases. This was also brought to the notice of the A.O by the assessee in his submission dated 12.11.2010 qua para 6 b which can be found at page 11 of the assessment order wherein the assessee had categorically stated that he has made purchase of goods from direct producer and only invoices of these three party were taken to regularize the same and by doing so, the assessee was getting the benefit in purchase price of ₹ 4 to 5 per 20 kgs. It was further made very clear that it is not a case where materials were not actually purchased. Thus, it can be seen that even the admission of the assessee related to the procurement of alleged bogus bills at no stage, the assessee admitted that there were no purchases.However, at the same time, in our considered opinion and in our understanding of the facts the possibility of inflated purchases cannot be ruled out. As the assessee himself as admitted in his submission that he is getting the benefit of ₹ 4 to 5 per 20 kgs., an addition of 8% should meet the ends of justice. - Decided partly in favour of assessee Addition in respect of alleged admitted undisclosed income - Held that - Since we have directed to restrict the addition on account of bogus purchase to 8% of the total purchases, in our considered opinion any admission/disclosure made by the assessee on account of alleged bogus purchases would be taken care of by the addition sustained, therefore, there is no need for making separate additions on this count.- Decided in favour of assessee

Issues Involved:
1. Alleged bogus purchases by the assessee.
2. Addition of undisclosed income.
3. Discrepancy in stock.
4. Levy of interest under sections 234A, 234B, 234C, and 234D of the Income Tax Act.

Detailed Analysis:

1. Alleged Bogus Purchases:
The central issue in these appeals was the alleged bogus purchases made by the assessee. During search and survey proceedings, it was discovered that M/s. Vishal Traders and other entities issued bogus/adjustment bills. The assessee was found to have made significant purchases from these entities. The assessee explained that while the invoices were obtained from these entities to regularize purchases made directly from producers, the purchases themselves were genuine. The Assessing Officer (A.O) disallowed the entire purchase amount of Rs. 5,66,81,430/- as bogus. The Commissioner of Income Tax (Appeals) [CIT(A)] reduced this disallowance to 25% of the bogus purchases, amounting to Rs. 1,41,70,358/-. The Tribunal further modified this, directing the A.O to restrict the disallowance to 8% of the total purchases, amounting to Rs. 45,34,515/-, acknowledging that while the invoices were bogus, the purchases were genuine.

2. Addition of Undisclosed Income:
The A.O made an additional disallowance of Rs. 61,05,000/- as undisclosed income, which was allegedly admitted by the assessee during the survey. The CIT(A) deleted this addition, reasoning that it was already included in the disallowance of bogus purchases. The Tribunal upheld this view, stating that the partial disallowance of purchases would cover any such admission, and thus, no separate addition was necessary.

3. Discrepancy in Stock:
During the survey, discrepancies in stock were noted, with a shortfall in Raydo stock and an excess in Raydo Khod stock. The A.O added Rs. 4,90,282/- based on the assessee's admission during the survey. The Tribunal found that the reconciliation statement provided by the assessee was not adequately considered by the A.O and CIT(A). Therefore, the Tribunal remanded this issue back to the A.O for fresh consideration, directing the A.O to examine the reconciliation statement and decide the issue afresh.

4. Levy of Interest under Sections 234A, 234B, 234C, and 234D:
The assessee contested the levy of interest under these sections. The Tribunal noted that the levy of interest is mandatory but consequential, directing the A.O to levy interest as per the provisions of the law.

Conclusion:
The Tribunal provided partial relief to the assessee by reducing the disallowance on account of bogus purchases to 8% and deleting the separate addition for undisclosed income. The issue of stock discrepancy was remanded for fresh consideration, and the levy of interest was upheld as per legal provisions. Appeals of the assessee were partly allowed for statistical purposes, and the appeals of the revenue were dismissed.

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