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2020 (4) TMI 540 - AT - Income TaxEstimation of income - Bogus purchases - Assessee is one of the beneficiary of accommodation entries of bogus purchase bills issued by Hawala dealers - HELD THAT - Both the sides have failed to prove the case in their favour with necessary evidences. Although, assessee has filed certain basic evidences, but failed to file further evidences to conclusively prove purchases to the satisfactions of the AO. AO had also failed to take the investigation to a logical conclusion by carrying out necessary enquires, but he solely relied upon information received from investigation wing, which was further supported by information received from Maharashtra Sales Tax Department. In the case of CIT vs Simith P. Sheth 2013 (10) TMI 1028 - GUJARAT HIGH COURT had considered a similar issue and held that at the time of estimation of profit from alleged bogus purchases no uniform yardsticks could be adopted, but it depends upon facts of each case. Although, both authorities have taken different rate of profit for estimation of income from alleged bogus purchase, but no one could support said rate of gross profit with necessary evidences or any comparable cases. Assessee is into the business of trading in Ceramic Tiles and other products - we are of the considered view that the CIT(A) has taken a fair view and estimated 12.50% gross profit on alleged bogus purchases to settle dispute between the parties and hence, we are inclined to uphold order of the ld. CIT(A) and dismiss appeal filed by the Revenue. - Decided against revenue.
Issues Involved:
1. Alleged bogus purchases and addition made by the Assessing Officer. 2. Application of section 69C of the Income Tax Act. 3. Assessment based on information from Sales Tax Department. 4. Appeal against the assessment order before the Ld.CIT(A). 5. Decision of the Ld.CIT(A) to restrict the addition to 12.5% of alleged bogus purchases. 6. Dismissal of the revenue's appeal by the Appellate Tribunal ITAT Mumbai. Issue 1: Alleged Bogus Purchases and Addition Made by the Assessing Officer: The case involved the revenue appealing against the order of the Ld. Commissioner of Income Tax (Appeals) regarding the addition made towards alleged bogus purchases. The Assessing Officer had added 100% of the amount of alleged bogus purchases to the total income of the assessee. The Ld.CIT(A) later scaled down the addition to 12.5% gross profit on total purchases from those parties. The Ld.CIT(A) considered the arguments of the assessee, who claimed that purchases were genuine and supported by necessary evidence. Issue 2: Application of Section 69C of the Income Tax Act: The Ld.CIT(A) analyzed the application of Section 69C of the Income Tax Act, which deals with unexplained expenditure. The section states that if an assessee fails to provide a satisfactory explanation for any expenditure incurred, it may be deemed as income. In this case, the appellant provided explanations and supporting evidence for purchases made from the bank account, indicating a legitimate source of expenditure. Therefore, the Ld.CIT(A) concluded that invoking Section 69C was not appropriate. Issue 3: Assessment Based on Information from Sales Tax Department: The assessment was initiated based on information received from the Sales Tax Authorities of the Government of Maharashtra regarding hawala dealers issuing bogus purchase bills. The assessee was identified as one of the beneficiaries of such accommodation bills. The Ld. AO relied on this information to make additions towards alleged bogus purchases, which was later contested by the assessee before the Ld.CIT(A). Issue 4: Appeal Against the Assessment Order Before the Ld.CIT(A): The assessee appealed against the assessment order before the Ld.CIT(A), reiterating that the purchases were genuine and supported by relevant evidence. The Ld.CIT(A) considered the submissions of the assessee, relevant case laws, and the nature of the transactions to arrive at a decision regarding the addition made by the Assessing Officer. Issue 5: Decision of the Ld.CIT(A) to Restrict the Addition to 12.5% of Alleged Bogus Purchases: The Ld.CIT(A) decided to restrict the addition made by the Assessing Officer to 12.5% of the alleged bogus purchases. This decision was based on the evidence provided by the assessee, including bank statements, purchase bills, and other documentation supporting the genuineness of the transactions. The Ld.CIT(A) considered various precedents and the nature of the business to arrive at this conclusion. Issue 6: Dismissal of the Revenue's Appeal by the Appellate Tribunal ITAT Mumbai: The Appellate Tribunal ITAT Mumbai dismissed the revenue's appeal, upholding the decision of the Ld.CIT(A) to restrict the addition to 12.5% of the alleged bogus purchases. The Tribunal considered the arguments presented by both sides, the lack of conclusive evidence, and the precedents set by other courts in similar cases. The Tribunal found the decision of the Ld.CIT(A) to be fair and in line with established practices, leading to the dismissal of the revenue's appeal. This comprehensive analysis covers the key issues involved in the legal judgment delivered by the Appellate Tribunal ITAT Mumbai.
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