2020 (5) TMI 508 - AT - Income Tax

Bogus purchases - addition @ 12.5% of the alleged bogus purchases and did not disturb the sales - assessee is engaged in the trading of iron and steel - HELD THAT - CIT(A) after considering various judicial pronouncements on the issue and the facts and circumstances of the case upheld the order of the A.O. after giving detailed finding. Nothing was placed before me so as to persuade me to deviate from the findings recorded by the ld. CIT(A). Accordingly, do not find any reason to interfere in the order of the ld. CIT(A) and uphold the same. - Decided against assessee.

Summary

Issues:
Challenge to the addition of alleged non-genuine purchases in the assessment for A.Y. 2009-10 under Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Alleged Non-Genuine Purchases
The case involved the reopening of assessment due to information on the assessee's accommodation purchase bills. The Assessing Officer (A.O.) added 12.5% of the alleged purchases to the assessee's income. The ld. CIT(A) confirmed this action based on the dubious nature of the bills and lack of concrete evidence supporting the purchases. The judicial pronouncements cited emphasized the importance of proving creditworthiness and genuineness of transactions beyond mere bank transactions. The appellant failed to produce evidence of delivery of goods or confirmations from suppliers, leading to doubts about the legitimacy of the purchases. The A.O. did not reject the books of accounts but only taxed the profit element embedded in the alleged bogus purchases.

Issue 2: Judicial Precedents and Legal Position
The judgment extensively referred to various case laws supporting the A.O.'s decision to tax the profit element in questionable purchases. The legal position emphasized the onus on the appellant to establish the identity and genuineness of suppliers. The reliance on VAT investigation and sales tax records was deemed significant in determining the legitimacy of transactions. The appellant's argument regarding the absence of comparable instances was refuted, emphasizing the unique nature of each assessment. The importance of VAT investigation in tax matters was highlighted through judicial precedents.

Issue 3: Lack of Evidence and Burden of Proof
The judgment highlighted the failure of the appellant to provide key evidence regarding the transactions, such as transportation details. The inability to discharge the burden of proof led to the A.O.'s decision to tax the profit element. The appellant's reliance on third-party statements was deemed insufficient, as the assessment was based on the appellant's failure to prove the transaction's genuineness.

Conclusion:
The ITAT upheld the decisions of the A.O. and ld. CIT(A) regarding the addition of 12.5% profit on the alleged non-genuine purchases. The judgment emphasized the importance of concrete evidence, the burden of proof on the appellant, and the significance of VAT investigation in determining the legitimacy of transactions. The appeal of the assessee was dismissed, affirming the action taken by the authorities in the assessment for the A.Y. 2009-10.