2017 (12) TMI 812 - HC - Income Tax

Estimation of income - bogus purchases - substantial question of law or fact - Commissioner (Appeals) has estimated the same at 25% whereas the Tribunal has estimated the same at 5% - Held that - Under the circumstances, whether the addition on account of bogus purchases should be estimated at 25% or at 5% cannot be said to be an issue of law giving rise to any question of law. Unexplained cash deposits in the bank accounts - Held that - The assessee had submitted cash book after properly recording the entries and submitted the same with the paper book. However, the Assessing Officer has not been able to pinpoint any defect in the complete cash book furnished by the assessee. Under the circumstances, when no defects could be pointed out by the AO in the cash book furnished by the assessee, no infirmity can be found in the reasoning adopted by the Tribunal while deleting such addition. Resultantly, the second question, as proposed by the revenue, also does not merit acceptance.

Summary

Issues:
1. Challenge to the order passed by the Income Tax Appellate Tribunal regarding bogus purchases.
2. Challenge to the order passed by the Income Tax Appellate Tribunal regarding unexplained cash deposits in bank accounts.

Analysis:

Issue 1: Challenge to the order passed by the Income Tax Appellate Tribunal regarding bogus purchases:
- The appellant revenue challenged the Tribunal's order deleting the addition of ?5,69,06,548 made on account of bogus purchases from M/s. Vishal Traders and M/s. Nagraj Traders.
- The Assessing Officer treated the purchases as bogus as the suppliers issued fake bills. The Commissioner (Appeals) restricted the addition to 25% of the alleged bogus purchases.
- The Tribunal found that the purchases were genuine based on sales and consumption details provided by the assessee, reducing the addition to 5%.
- The High Court held that the estimation of the addition percentage is not a question of law. The Tribunal's decision was upheld as the purchases were substantiated by sales and consumption records.

Issue 2: Challenge to the order passed by the Income Tax Appellate Tribunal regarding unexplained cash deposits in bank accounts:
- The Assessing Officer treated unexplained cash deposits in bank accounts as income and added them to the total income of the assessee.
- The Commissioner (Appeals) restricted the addition to amounts not reflected in the e-cash book impounded during survey proceedings.
- The Tribunal accepted the assessee's explanation that the cash deposits were made from available cash balance and properly recorded in the cash book.
- The High Court upheld the Tribunal's decision, stating that no defects were found in the cash book submitted by the assessee, and therefore, the addition was deleted.

In conclusion, the High Court dismissed the appeals as the Tribunal's orders did not raise any substantial questions of law warranting interference. The decisions regarding bogus purchases and unexplained cash deposits were upheld based on the evidence and explanations provided by the assessee.