2018 (12) TMI 1199 - AT - Income Tax

Addition made on account of non-genuine purchases - Held that - Direct the AO to restrict the addition to the extent of 5% of the alleged non-genuine purchases in both the assessment years. Consequently, the grounds raised by the assessee are partly allowed.

Summary

Issues:
1. Addition made on account of non-genuine purchases.

Analysis:
The appeals were filed against a common order passed by the Commissioner of Income Tax for assessment years 2009-10 & 2010-11. The primary issue in dispute was the addition made on account of non-genuine purchases. The assessee, a partnership firm engaged in trading and export-import business, failed to prove the genuineness of purchases made from certain parties, leading to the Assessing Officer reopening the assessments under section 147 of the Income Tax Act, 1961. The AO conducted an independent inquiry and found discrepancies in the purchases. For the assessment year 2009-10, the selling parties denied selling any goods to the assessee, resulting in the addition of entire purchases claimed from those parties. For the assessment year 2010-11, the AO estimated the profit at 12.5% of the non-genuine purchases.

During the appeal, the Authorized Representative argued that a similar case involving a partner of the assessee firm had the addition restricted to 5% of non-genuine purchases by the Tribunal. The Judicial Member analyzed the facts and previous judgments and directed the AO to limit the addition to 5% of the alleged non-genuine purchases for both assessment years. This decision was influenced by a previous case where the Coordinate Bench had restricted the addition to 5% under similar circumstances. As a result, the appeals filed by the assessee were partly allowed, and the addition was reduced to 5% of the non-genuine purchases for both assessment years.

In conclusion, the Tribunal's judgment focused on the genuineness of purchases made by the assessee, the AO's additions based on lack of proof, and the comparison with previous cases to determine the appropriate percentage for the addition on non-genuine purchases. The decision highlighted the importance of providing proper documentation and evidence to support claimed purchases to avoid such additions in income tax assessments.