2020 (4) TMI 488 - AT - Income Tax

Bogus purchases - hawala purchases - CIT-A confirming addition of 12.5% - HELD THAT - After reopening assessment, AO made detailed enquiry by issue of notice to the suppliers and found that assessee has taken accommodation bill of the purchases - considering the reply filed by AO, AO only added profit element in such alleged bogus purchases which works out at 12.5%. CIT(A) has observed that before the AO, assessee himself has conceded for addition of 12.5% of hawala purchases, therefore, assessee should not have any grievance at all to file appeal before him. CIT(A) has considered various judicial pronouncements on the issue and after applying the same to the facts of the case, confirmed the addition to the extent of 12.5% of the alleged bogus purchases. Nothing was placed before us so as to persuade us to deviate from the findings of the CIT(A). Accordingly, we do not find any reason to interfere in the order of CIT(A) for upholding addition of 12.5% of alleged bogus purchases. - Decided against assessee.

Summary

Issues:
Confirmation of addition of 12.5% of alleged bogus purchases made by the assessee.

Analysis:
The appeal was filed by the assessee against the order of CIT(A)-6, Mumbai for A.Y. 2009-10 under section 143(3) r.w.s. 147 of the Income Tax Act, 1961, regarding the addition of 12.5% of alleged bogus purchases. Despite notice issuance, the assessee did not appear, leading the Bench to proceed with the appeal based on the contentions of the ld. DR and the material on record. The AO reopened the assessment based on information from the Sales Tax Department regarding accommodation bills without physical goods delivery. Detailed enquiry revealed the purchases were not genuine, resulting in the addition of 12.5% of alleged bogus purchases in the assessee's income, following the decision of the Gujarat High Court in the case of Simit P Sheth.

The CIT(A) confirmed the AO's action, emphasizing the overwhelming evidence from the Sales tax authorities indicating hawala bill issuance without actual goods supply. The appellant failed to reconcile the purchases with the items sold and provide crucial evidence like proof of delivery, transport challans, and goods inward register. Legal precedents highlighted the burden of proof on the assessee to establish the transaction's genuineness. The AO concluded the assessee engaged in non-genuine transactions to suppress profits and reduce tax liability, justifying the addition. The Gujarat High Court decision guided the estimation of the profit element in the purchases, leading to the confirmation of the 12.5% addition. The appellant's failure to provide evidence resulted in the dismissal of the appeal, with no reason found to interfere with the CIT(A)'s decision.

In conclusion, the Tribunal dismissed the appeal, upholding the addition of 12.5% of alleged bogus purchases. The decision was based on the failure of the appellant to provide evidence and the legal principles regarding the burden of proof in establishing transaction genuineness. The CIT(A)'s decision was deemed appropriate, with no grounds presented to challenge it.

The judgment underscores the importance of substantiating transactions with evidence and highlights the burden on the assessee to prove the genuineness of transactions to avoid tax implications. The legal precedents cited emphasize the significance of surrounding circumstances and the burden of proof in tax matters.