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2020 (9) TMI 413 - AT - Income TaxEstimation of income - bogus purchases - restriction to the extent of 15% by CIT(A) as against 100% done by the Assessing Officer - HELD THAT - ITAT for A.Y. 2010-11 on same facts as directed that the addition should be restricted to 6.5% of the bogus purchases. Thereafter in Miscellaneous Application the ITAT has taken note of assessee s payment of 4% MVAT and thereafter it has directed that addition should be restricted to 2.5%. No case has been made out of the above decision of the ITAT in assessee s own case in Income tax appeals as well as Miscellaneous Application have been reversed by Hon'ble Jurisdictional High Court. In this view of the matter, we have to respectfully follow the Coordinate Bench decision. We admit additional evidence being MVAT paid by the assessee for the concerned assessment years on the impugned purchases. We direct the Assessing Officer to examine the veracity of these MVAT paid @ 4% by the assessee. If the same are found in order, in accordance with the ITAT decision as above addition should be restricted to 2.5% of the impugned purchases.
Issues Involved:
1. Validity of the reopening of assessment. 2. Merits of the addition on account of bogus purchases. 3. Percentage of disallowance of bogus purchases. Issue-wise Detailed Analysis: 1. Validity of the Reopening of Assessment: The assessee challenged the validity of the reopening of the assessment. The learned CIT(A) dismissed the issue regarding the validity of reopening. The Assessing Officer (AO) issued a notice under section 148 of the Income Tax Act on 09.01.2014 after recording reasons and provided these reasons to the appellant. The appellant submitted objections, which were rejected by the AO, who then proceeded to complete the assessment proceedings. 2. Merits of the Addition on Account of Bogus Purchases: The AO made a 100% disallowance of the purchases claimed by the assessee from certain parties listed as hawala dealers by the Sales Tax Department, Mumbai. The AO did not doubt the sales but questioned the genuineness of the purchases. The assessee argued that the purchases were genuine, providing various documents and evidence, including transaction details, ledger accounts, bank statements, and VAT registration details. However, the AO did not conduct any direct inquiry with the alleged bogus suppliers and rejected the assessee's submissions. 3. Percentage of Disallowance of Bogus Purchases: The learned CIT(A) found that a 100% addition was not justified and restricted the disallowance to 15% of the bogus purchases, following his decision for A.Y. 2010-11 in the assessee's own case. This decision was based on the principle that only the real income should be subjected to tax, not a notional or exaggerated amount. The CIT(A) observed that the appellant did not provide sufficient evidence to corroborate his arguments during appellate proceedings. Tribunal's Analysis and Decision: The Tribunal noted that in the assessee's own case for A.Y. 2010-11, the ITAT had restricted the addition to 6.5% (considering applicable VAT and profit). In a subsequent Miscellaneous Application, the ITAT further reduced the addition to 2.5% after acknowledging the payment of 4% MVAT by the assessee. The Tribunal found no difference in the facts and circumstances of the present case compared to A.Y. 2010-11 and decided to follow the same approach. Final Judgment: The Tribunal admitted additional evidence regarding the MVAT paid by the assessee and directed the AO to verify the veracity of these payments. If verified, the addition should be restricted to 2.5% of the impugned purchases, in line with the ITAT's decision for A.Y. 2010-11. Consequently, the appeals by the assessee were partly allowed, and the appeals by the Revenue were dismissed.
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