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2021 (1) TMI 1063 - AT - Income TaxEstimation of income - Bogus purchases - assessee has failed to furnish stock register for the relevant period and the assessee has failed to produce the supplier before the AO - CIT-A sustained addition to 25% - HELD THAT - Hon ble Gujarat High Court in the case of CIT vs. Simit P. Sheth 2013 (10) TMI 1028 - GUJARAT HIGH COURT has upheld the addition of 12.5% of the total amount of bogus purchases sustained by the ITAT, holding that, only profit element embedded in such purchases could be added to the income of the assessee.In the present case, the Ld. CIT (A) has sustained the addition of 25%, which is not in consonance with the judgment of the Hon ble Gujarat High Court. No merit in the contention of the revenue that the Ld. CIT (A) ought to have sustained the addition made by the AO. The cases relied upon by the Ld. AR are distinguishable on facts and the ratio laid down in the said cases are not applicable to the present case. Hence, in our considered view, the addition of 12.5% is reasonable to meet the ends of justice. We therefore, modify the findings of the Ld. CIT (A) and restrict the addition to 12.5% of the total amount of bogus purchases determined by the AO.
Issues:
1. Assessment of alleged bogus purchases and addition of income. 2. Challenge to the CIT(A)'s decision on the grounds of inadequate evidence and reasoning. 3. Discrepancy in the percentage of addition to income upheld by the CIT(A) compared to relevant case law. Analysis: 1. The case involved cross-appeals by the assessee and the revenue against the CIT(A)'s orders regarding alleged bogus purchases amounting to ?15,16,320. The AO determined the total income at ?15,53,390 after adding the entire amount of bogus purchases. The CIT(A) restricted the addition to 25% of the total bogus purchases. The assessee challenged this decision, arguing for the deletion of the entire addition, while the revenue contended that the entire amount should be added. The Tribunal found that the assessee failed to establish the genuineness of the transaction, leading to an estimation-based profit determination. The Tribunal, considering precedents, reduced the addition to 12.5% to align with the principle of adding only the profit element of such transactions. 2. The assessee challenged the CIT(A)'s decision, alleging the reliance on insufficient evidence and failure to consider submissions. The assessee provided various documents to establish the transaction's genuineness, but the CIT(A) upheld the 25% addition. The revenue argued against this decision, citing the inability to produce primary documents and the transaction's dubious nature. The Tribunal found the CIT(A)'s decision reasonable based on the evidence and arguments presented, reducing the addition to 12.5% to ensure justice. 3. The revenue challenged the CIT(A)'s decision to restrict the addition to 25% of the bogus purchases, citing the inability to substantiate purchases and lack of primary documents. The Tribunal, after thorough consideration, upheld the decision made in the assessee's appeal, reducing the addition to 12.5%. This alignment aimed to balance the profit element of the transactions in line with legal principles. The revenue's appeal was dismissed as infructuous due to the decision made in the assessee's appeal. In conclusion, the Tribunal partially allowed the assessee's appeal and dismissed the revenue's appeal, modifying the addition to income from alleged bogus purchases to 12.5% of the total amount, aligning with legal precedents and principles of justice.
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