2021 (12) TMI 1193 - AT - Income Tax

Estimation of income - Bogus purchases u/s 69C - HELD THAT - Since the issue is squarely covered by the order of Co-ordinate Bench of this Tribunal in the case of Pankaj K. Choudhary, 2021 (10) TMI 653 - ITAT SURAT . Hence,respectfully following the above binding precedent we disallow 6% of the impugned purchases.

Summary

Issues involved:
- Dispute over restricting addition made by AO on account of bogus purchases.
- Validity of Ld. CIT(A)'s decision to allow only 5% disallowance.
- Comparison with previous judgments regarding similar cases.

Issue 1: Dispute over restricting addition made by AO on account of bogus purchases

The case involved appeals by the Revenue against separate orders passed by the CIT(A) for assessment years 2014-15 and 2008-09. The Assessing Officer had made additions in respect of bogus purchases amounting to ?4,19,00,541 under section 69C of the Income Tax Act, 1961. The assessee, engaged in diamond trading, had shown gross profit at 1.91% and net profit at 0.03% on a total turnover of ?207,93,27,931. The assessing officer found that purchases from certain concerns were bogus, leading to the disallowance. The assessee's books of accounts were rejected under section 145(2) of the Act due to these findings.

Issue 2: Validity of Ld. CIT(A)'s decision to allow only 5% disallowance

The CIT(A) partly allowed the appeal of the assessee, following previous decisions and restricted the disallowance of bogus purchases to 5% of such purchases. This decision was based on various judgments of ITAT, High Court, and Supreme Court. The CIT(A) granted relief to the assessee to the tune of ?3,98,05,514. The Revenue, aggrieved by this decision, appealed before the ITAT. During the hearing, the Revenue argued that the issue was covered by a Co-Ordinate Bench judgment in a similar case, where 6% of total purchases were held as an addition to be made in the hands of the assessee. The ITAT, following the precedent, disallowed 6% of the impugned purchases, thereby allowing the Revenue's appeal.

Issue 3: Comparison with previous judgments regarding similar cases

The ITAT relied on a previous judgment involving Pankaj K. Choudhary, where 6% of impugned purchases were disallowed. The ITAT emphasized the need to consider the income component of disputed transactions to prevent revenue leakage. The decision was influenced by a case involving Mayank Diamonds Pvt. Ltd, where the High Court restricted additions to 5% of GP. By following the Co-Ordinate Bench's precedent, the ITAT disallowed 6% of the impugned purchases in the current case, aligning with the principles established in previous judgments.

This comprehensive analysis covers the issues involved in the legal judgment, detailing the dispute, decisions made by the authorities, and the application of precedents to reach a final decision.