2019 (3) TMI 727 - AT - Income Tax

Bogus purchases - Hawala transactions - addition @ 20% or 15% - proof of genuineness of the transactions by providing identity of the parties, PAN details, return of income as well as other detail - assessee submitted that addition to the extent 20% of bogus purchases should be made in conformity with the previous years - HELD THAT - We find that various scenarios of bogus purchase issue was adjudicated in series of decisions by the Pune Benches of Tribunal with lead order in M/s. Chhabi Electricals Pvt. Ltd. Vs. DCIT 2017 (6) TMI 514 - ITAT PUNE as upheld the addition of 10% of the bogus purchases over and above the GP shown by assessee. Thus we direct 10% of the bogus purchases over and above GP percentage shown by the assessee to be added as bogus purchases. Hence, grounds raised by the assessee are partly allowed.

Summary

Issues:
Confirmation of addition of ?34,25,000/- on account of bogus purchases.

Analysis:
1. The appeal pertains to the confirmation of addition of ?34,25,000/- by the Assessing Officer on account of bogus purchases for the assessment year 2010-11.

2. The Assessing Officer verified the purchases made by the assessee and found discrepancies, leading to the addition. The assessee failed to provide substantial evidence to prove the genuineness of the transactions, resulting in the addition of the entire amount to the total income.

3. The First Appellate Authority upheld the addition, emphasizing that the assessee's representative admitted the disallowance and offered to pay tax, indicating the lack of a valid case on the assessee's part.

4. During the hearing, the assessee's representative argued for a 20% addition based on similar instances in previous and subsequent assessment years. In contrast, the Department argued for the confirmation of the entire amount due to the assessee's admission of bogus purchases.

5. The Tribunal referred to previous decisions regarding bogus purchases and upheld the addition of 10% of the bogus purchases over and above the Gross Profit shown by the assessee. This decision was based on detailed analysis and legal principles outlined in the case of M/s. Chhabi Electricals Pvt. Ltd. Vs. DCIT.

6. The Tribunal highlighted different scenarios related to bogus purchases and provided specific guidelines for determining the extent of addition based on the evidence presented by the assessee and the nature of transactions involved.

7. Ultimately, the Tribunal directed the addition of 10% of the bogus purchases over and above the Gross Profit percentage shown by the assessee, partially allowing the grounds raised by the assessee.

8. The appeal of the assessee was partly allowed, and the order was pronounced on 24th January 2019.