2021 (3) TMI 564 - AT - Income Tax

Estimation of income - Bogus purchases - HELD THAT - We find that the assessee is engaged into manufacturing and cutting of polishing of diamonds also. Moreover, exhaustive information has been obtained by DGIT investigation, Mumbai that the assessee has taken huge accommodation entry which is running into ten of crores of rupees from Rajendra Jain Group Company. Hence, the aforesaid decision referred by assessee s counsel is not applicable here. In this case, we find that there is no enquiry by the AO relating to veracity of sales arising out of bogus purchases. Moreover, there is no examination of the production and other records of the assessee. AO has proceeded to allow relief to the assessee by adding only 12.5% and so the further relief granted by Revenue authorities are itself on hollow ground. But as noted above, Revenue s appeal is not maintainable on account of low tax effect. Be that as it may, since, the ITAT in assessee s own case 2018 (8) TMI 2019 - ITAT MUMBAI has upheld the addition of 2% of the bogus purchases and no information has been furnished that the said order has been reversed by the Hon ble Jurisdictional High Court, following the said precedent, we uphold the order of the CIT(A).

Summary

Issues:
Cross appeals challenging reduction on account of bogus purchases from 12.5% to 2% and the sustainance of 2% addition on the bogus purchases.

Analysis:
The case involved cross appeals from the Revenue and the assessee regarding the reduction of bogus purchases from 12.5% to 2% and the sustainance of 2% addition on the bogus purchases for Assessment Years 2013-14 and 2014-15. The Revenue challenged the reduction, while the assessee contested the sustainance of the addition. The Assessing Officer made a 12.5% addition on the bogus purchases due to doubts raised by the Investigation Wing, Mumbai, regarding the genuineness of the purchases. The onus was on the assessee to prove the legitimacy of the purchases, which they failed to do convincingly. The Tribunal noted that the assessee had obtained accommodation purchase bills without actual delivery of goods, aiming to increase profits by recording bogus purchases at a higher level. The Tribunal estimated the GP percentage at 12.5% and made an addition based on the alleged bogus purchases.

The CIT(A) restricted the addition to 2% of the bogus purchases in line with the ITAT's decision in the assessee's earlier case. The Tribunal considered various documents submitted by the assessee, such as ledger copies, bank statements, and sales details, but found discrepancies in the transactions. The Tribunal upheld the CIT(A)'s decision to restrict the addition to 2% based on the available evidence. The Tribunal also referenced previous years' decisions and the involvement of non-genuine parties in the transactions.

The Tribunal dismissed the Revenue's appeal due to the tax effect being below the limit set by CBDT for filing appeals. However, the assessee's appeal was also dismissed as the Tribunal found no reason to deviate from the CIT(A)'s decision to restrict the addition to 2% of the bogus purchases. The Tribunal emphasized the importance of proving the genuineness of transactions and upheld the CIT(A)'s order based on the available evidence and precedents. The appeals filed by both parties were ultimately dismissed based on the above analysis and the relevant legal principles.

In conclusion, the Tribunal's decision highlighted the significance of providing strong evidence to substantiate transactions and the need to adhere to precedents and legal standards in determining additions related to bogus purchases. The judgment emphasized the importance of thorough documentation and compliance with tax regulations to avoid adverse consequences in assessment proceedings.