2021 (5) TMI 774 - AT - Income Tax

Estimation of income - bogus purchases - estimation of 12.5% by CIT-A - HELD THAT - As assessee was engaged in the business of civil construction which would require consumption of material. The purchase transactions carried out by the assessee with suspicious suppliers were evidenced by copies of invoices and the payments were through banking channels. The confirmation of accounts as well as PAN of the suppliers was duly furnished. The sales turnover achieved by the assessee was not disputed by Ld. AO. As assessee failed to produce any of the suppliers for confirmation of accounts and notices issued u/s 133(6) did not elicit satisfactory response. Therefore, it was a fit case for estimation of additions on these suspicious purchases. In our considered opinion, Ld.CIT(A) has clinched the issue in the correct perspective. The estimation of 12.5% was quiet fair and reasonable and the same do not require any interference on our part. Therefore, by confirming the stand of Ld. CIT(A), we dismiss the appeal.

Summary

Issues:
- Assessment Year (AY) 2009-10: Dispute over additions on alleged bogus purchases.
- Assessment Year (AY) 2010-11: Similar dispute over additions on suspicious purchases.

Analysis:
*Assessment Year (AY) 2009-10:*
1. The appeal contested the order of the Ld. Commissioner of Income-Tax (Appeals) dated 22/02/2019, restricting additions on alleged bogus purchases to 12.5%.
2. The assessee, a resident individual engaged in civil construction, faced scrutiny due to purchases from suspicious dealers. The assessee provided evidence of valid invoices and payments through account channels, but notices to suppliers were returned unserved.
3. The Ld. CIT(A) concluded that goods were received from parties different from those issuing bills, indicating possible grey market involvement. The additions were restricted to 12.5% based on Tribunal decisions, which the revenue appealed.
4. The ITAT upheld the CIT(A)'s decision, considering the nature of the assessee's business, documented purchases, lack of supplier confirmations, and unsatisfactory responses to notices.

*Assessment Year (AY) 2010-11:*
5. The facts and issues mirrored those of AY 2009-10, with the assessee facing additions on suspicious purchases totaling &8377; 96.98 Lacs, later restricted to 12.5% by the Ld. CIT(A).
6. The ITAT, applying the reasoning from AY 2009-10, dismissed the revenue's appeal for AY 2010-11 as well.
7. Both appeals were ultimately dismissed, affirming the decisions of the Ld. CIT(A) in restricting the additions on suspicious purchases to 12.5%.

In conclusion, the ITAT upheld the Ld. CIT(A)'s decisions for both AYs, emphasizing the need for substantiated purchases, proper supplier confirmations, and fair estimation of additions in cases of suspicious transactions.