2017 (6) TMI 65 - AT - Income Tax

Addition to bogus purchases - assessment of profit - grievance of the assessee is that the amount of profit which is already disclosed by the assessee should be deducted; otherwise it will lead to excessive addition - Held that - The assessee emphatically stated before us that if this issue is sent back to the file of the AO then, the assessee shall be able to match the amount of the sales with the corresponding amount of alleged bogus purchases and therefore the exact amount of profit disclosed on these purchases can be factually worked out. This issue is accordingly sent back to the file of the AO where the assessee shall submit requisite details and evidences to show the corresponding amounts of sales against the impugned bogus purchases and then the amount of addition sustained @ 8% by the Ld. CIT(A) shall be further reduced by the amount of gross profit actually shown on these purchases. The addition shall be sustained on the balance amount. The AO shall give adequate opportunity to the assessee before deciding this ground afresh. Thus, assessee would get part relief. This ground may be treated as allowed for statistical purposes.

Summary

Issues involved:
1. Addition on the point of bogus purchases for AY 2008-09.

Detailed Analysis:
The Appellate Tribunal ITAT Mumbai heard appeals filed by the assessee for different years involving identical issues related to bogus purchases. The case pertained to the assessment orders passed under section 143(3) for various years. The primary issue revolved around the addition on the point of bogus purchases amounting to ?11,66,646. The Assessing Officer (AO) reopened the case based on information regarding transactions of bogus purchases. The AO contended that purchases from various parties were controlled by an individual involved in providing accommodation entries. The assessee submitted detailed evidence to prove the genuineness of the purchases, including bills, invoices, and stock registers. The AO agreed to an addition of 8% of the purchases, but ultimately added 12.5% as bogus purchases, resulting in an addition of ?18,22,870.

The assessee appealed to the CIT(A), arguing that the purchases were genuine and that the statement made by the individual involved in providing accommodation entries was retracted. The CIT(A) partially allowed the appeal, reducing the rate of addition to 8% but upheld the addition. Dissatisfied, the assessee approached the Tribunal, reiterating the genuineness of the purchases and presenting detailed arguments supported by various judgments. The Tribunal considered the submissions and the lower authorities' orders, noting that the assessee had offered the addition but requested a fair computation. The Tribunal sustained the addition at 8% but directed the AO to deduct the proportionate gross profit already disclosed by the assessee against the bogus purchases to avoid excessive addition. The matter was remanded to the AO for factual verification and adjustment of the addition accordingly.

The Tribunal also directed that similar issues in appeals for subsequent years be treated as allowed for statistical purposes, following the decision for AY 2008-09. Ultimately, all appeals filed by the assessee were treated as partly allowed, emphasizing the need for a fair and justified computation of the addition on account of bogus purchases.