9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (11) TMI 375 - AT - Income TaxReopening of assessment - addition of bogus purchases - profit rate application - Held that - We have observed that assessee failed to furnish confirmed copy of ledger account and current mailing address of the hawala parties. Accordingly, books of accounts were rejected u/s.145(3) by following the decision of Hon ble Delhi High Court in the case of Jansampark Advertising And Marketing (P) Ltd. 2015 (3) TMI 410 - DELHI HIGH COURT . After considering the fact that material so purchased have actually been used by the assessee in manufacturing activity and also the fact that assessee has furnished quantitative analysis of consumption as per tax audit report, the CIT(A) has restricted addition to the extent of 12.5%. Keeping in view of the findings recorded by CIT(A) vis- -vis G.P. rate disclosed by assessee during the year under consideration in its manufacturing activity, we modify the orders of the lower authorities and direct for upholding addition by applying profit rate of 10%. We direct accordingly.
Issues Involved:
1. Legitimacy of Reopening the Assessment. 2. Genuineness of Purchases from Hawala Parties. 3. Estimation of Income and Disallowance of Bogus Purchases. 4. Rejection of Books of Accounts under Section 145(3). Detailed Analysis: 1. Legitimacy of Reopening the Assessment: The assessment was reopened based on information from the Sales Tax Department regarding bogus purchases. The Assessing Officer (AO) initiated reassessment proceedings under Section 143(3) read with Section 147 of the Income Tax Act, 1961, leading to the addition of ?68,08,698/- to the total income of the assessee. 2. Genuineness of Purchases from Hawala Parties: The assessee, a Hindu Undivided Family (HUF) engaged in the business of manufacturing and trading of HDPE pipes, declared total income of ?3,86,912/-. However, the AO found discrepancies in purchases from certain hawala parties. Despite the assessee’s claims of making payments through banking channels and consuming the materials in manufacturing, the AO noted that the hawala parties admitted to issuing bogus bills without actual delivery of goods. The assessee failed to provide confirmations, current mailing addresses, or produce the hawala parties for examination. 3. Estimation of Income and Disallowance of Bogus Purchases: The Commissioner of Income Tax (Appeals) [CIT(A)] observed that the assessee could not reconcile the quantitative details of purchases and sales. The CIT(A) noted several defects in the assessee's claims, such as lack of transport receipts, non-verifiable documents, and the pattern of payments differing from regular suppliers. The CIT(A) referenced several judicial precedents where disallowance percentages for bogus purchases ranged from 12.5% to 100%. Ultimately, the CIT(A) restricted the addition to 12.5% of the bogus purchases, amounting to ?8,51,087/-, while deleting the balance ?59,57,611/-. 4. Rejection of Books of Accounts under Section 145(3): The AO rejected the books of accounts under Section 145(3) due to the assessee's failure to maintain proper stock registers and produce verifiable documents. The CIT(A) upheld this rejection, citing the assessee's inability to justify the genuineness of the purchases and the failure to produce hawala parties for examination. The CIT(A) emphasized the importance of effective inquiry and the obligation of the first appellate authority to ensure a logical conclusion. Final Judgment: The Income Tax Appellate Tribunal (ITAT) considered the arguments and the orders of the authorities below. The ITAT noted that the material purchased was actually used in the manufacturing activity and the assessee provided a quantitative analysis of consumption. However, considering the findings of the CIT(A) and the Gross Profit (G.P.) rate disclosed, the ITAT modified the orders of the lower authorities and directed for upholding the addition by applying a profit rate of 10%. Consequently, the appeal of the revenue was dismissed, and the appeal of the assessee was allowed in part. Order Pronouncement: The order was pronounced in the open court on 24/10/2017.
|
