2018 (1) TMI 581 - AT - Income Tax

Reopening of assessment - addition of 6% of the bogus purchases - Held that - After making detailed enquiries the AO reached to the conclusion that out of the total purchases 87.5% of the alleged purchases are genuine whereas purchase to the tune of 12.5% was bogus. Accordingly he added only 12.5% of such alleged bogus purchases. After considering various judicial pronouncements the CIT(A) has further restricted the addition to the extent of 6%. The CIT(A) has relied on various judicial pronouncements as well has taken into account the margin earned by the assessee vat rate of 4% etc. Thus no infirmity in the order of the CIT(A) in so far as he has considered all aspects and accordingly further reduced the addition to 6%.- Decided against assessee.

Summary

Issues:
- Reopening of assessment
- Addition of 6% of bogus purchases

Reopening of Assessment:
The appeals were filed by the assessee against the order of the CIT(A)-29, Mumbai for assessment years 2010-11 & 2011-12 regarding the order passed under Section 143(3) r.w.s. 147 of the Income Tax Act. The AO received information from the Sales Tax Department, Mumbai, indicating that the assessee was involved in taking accommodation entries of bogus purchases from certain parties. The AO issued a notice under section 143(3) r.w.s.147 and completed the assessment proceedings. The AO observed that the purchases were bogus and aimed at inflating purchases to reduce taxable profits/income. Despite requests for details and production of books of accounts, the assessee failed to establish the genuineness of purchases, leading to an addition of 12.5% on the alleged bogus purchases.

Addition of 6% of Bogus Purchases:
The CIT(A) reduced the addition from 12.5% to 6%, noting that the purchases were not established as genuine, as the parties from whom the purchases were supposed to have been made did not exist at the given addresses. The CIT(A) relied on judicial pronouncements and considered the margin earned by the assessee, VAT rate, and other factors to reduce the addition. The ITAT confirmed the CIT(A) findings, emphasizing that detailed inquiries were made, and after considering various aspects, the addition was appropriately reduced to 6%. The ITAT dismissed the appeals for both assessment years based on the reasoning and findings of the CIT(A).

In conclusion, the ITAT upheld the decision of the CIT(A) to reduce the addition to 6% of the alleged bogus purchases, considering the lack of establishment of the purchases' genuineness and various judicial pronouncements. The appeals were dismissed for both assessment years based on the detailed analysis and reasoning provided by the CIT(A) and confirmed by the ITAT.