2021 (5) TMI 251 - AT - Income Tax

Estimation of income - bogus purchases - CIT(A) estimated additions of 12.5% - HELD THAT - We find that the issue has rightly been clinched in proper perspective by Ld. CIT(A). The Sales Turnover was not in doubt and the assessee was in possession of primary purchase documents. The payment to the supplier was through banking channels. There could be no sale without actual purchase of material keeping in view the assessee's nature of business. The facts of the case made it a fit case to estimate the profit element embedded in these transactions. The estimation of 12.5% as made by Ld. CIT(A) was quite fair and reasonable on the facts of the case. Therefore, concurring with findings of Ld. CIT(A) in the impugned order, we dismiss the appeal of revenue.

Summary

Issues:
Appeal by revenue contesting order of CIT(A) providing relief on alleged bogus purchases for AY 2009-10.

Analysis:
The appeal pertains to the Assessment Year 2009-10 where the revenue challenges the order of the Ld. Commissioner of Income Tax (Appeals)-12, Mumbai, dated 17/07/2019, which granted relief to the assessee concerning alleged bogus purchases. The assessee, a resident corporate dealer of chemicals, was assessed under section 143(3) r.w.s. 147. Suspicious purchases amounting to ?102.83 Lacs from three entities flagged by Sales Tax Authorities were identified. The case was reopened, and the assessee was asked to provide details to substantiate the purchases. Despite submitting ledger extracts, payment details, and invoices, transportation details were lacking. Notices issued under section 133(6) did not yield satisfactory responses. The Assessing Officer (AO) concluded that the assessee failed to prove the genuineness of the purchases, resulting in the addition of ?317.70 Lacs to the income.

During further appeal, the assessee submitted additional evidence under rule 46A, leading to remand proceedings. The Ld. CIT(A) accepted purchases worth ?198.62 Lacs out of ?214.87 Lacs. For the remaining ?119.07 Lacs, an addition of 12.5% was estimated based on a decision of the Hon'ble Gujarat High Court. The revenue challenged this decision, while the assessee seemingly accepted it. The ITAT, after reviewing the facts, concurred with the Ld. CIT(A)'s findings. The Sales Turnover was confirmed, primary purchase documents were available, payments were made through banking channels, and the nature of the assessee's business indicated the necessity of actual purchases for sales to occur. The ITAT deemed the 12.5% estimation by the Ld. CIT(A) fair and reasonable, leading to the dismissal of the revenue's appeal.

In conclusion, the ITAT upheld the decision of the Ld. CIT(A) and dismissed the revenue's appeal concerning the alleged bogus purchases for the Assessment Year 2009-10.