2022 (9) TMI 706 - AT - Income Tax

Estimation of income - Unproved purchases - Addition on account of purchases by way of bogus bills - Addition is restricted to 12.5% of disputed purchases - HELD THAT - It is evident that the AO has not raised any doubt regarding the above claim of the assessee. Further, it cannot be doubted that without the purchase of construction material the construction activity as claimed to be restarted by the assessee cannot be carried out. It appears to be a case of bogus bills arranged from aforesaid entity and construction material purchase from somewhere else at low cost. Entire bogus purchases cannot be added in such a suggestion. Considering the business activities of the assessee and the nature of material purchased from the hawala dealers, we are of the view that a reasonable disallowance of the purchases would meet the possibility of revenue leakage. Addition as restricted to 12.5% of disputed purchases - We find that the same is in line with the judgment of Hon‟ble jurisdictional High Court in PCIT vs Paramshakti Distributors Ltd. 2019 (7) TMI 838 - BOMBAY HIGH COURT . Apart from the ledger account of M/s Sai International Impex in books of assessee, no other evidence is brought on record to support the assessee s claim that purchases were only to an extent from the said entity and accordingly, plea of the assessee is rejected in this regard. Therefore, we direct the AO to restrict the addition to 12.5% of alleged bogus purchases. As a result, the sole ground raised in present appeal is partly allowed. Addition on account of insurance payment on the policy of the Directors - CIT(A) held that such payment is the personal liability of the Director and therefore, cannot be said to have been incurred wholly and exclusively for the purpose of the construction business of the assessee and thus not allowable under section 37(1) - HELD THAT - - Considering the material available on record, we find no infirmity in the impugned order passed by the CIT(A) on this issue. As a result, ground no.2, raised in assessee s appeal, is dismissed.

Summary

Issues:
1. Delay in filing appeals and condonation of delay.
2. Addition on account of unproved purchases for A.Y. 2010-11.
3. Addition of insurance payment for A.Y. 2011-12.

Delay in filing appeals and condonation of delay:
The appeals were filed by the assessee challenging orders passed by the Commissioner of Income Tax (Appeals) for A.Y. 2010-11 and 2011-12. The appeals were delayed by 177 days, and the assessee sought condonation of delay due to oversight in filing the appeals. The Tribunal, after considering the reasons provided and settlement reached in insolvency proceedings, condoned the delay and proceeded to decide the appeals on merits.

Addition on account of unproved purchases for A.Y. 2010-11:
The assessee challenged the addition made by the Assessing Officer on account of purchases through bogus bills. The Tribunal noted that the assessee failed to provide evidence of actual utilization of material from the alleged purchases. However, considering the nature of the construction business and the need for construction material, the Tribunal restricted the addition to 12.5% of disputed purchases. The decision was based on the business activities of the assessee and the possibility of revenue leakage, aligning with a judgment of the jurisdictional High Court.

Addition of insurance payment for A.Y. 2011-12:
The assessee raised grounds regarding the addition of insurance payment on the policy of the Directors. The Tribunal upheld the decision of the CIT(A) that such payments were personal liabilities of the Directors and not wholly and exclusively incurred for the construction business. Therefore, the addition on account of insurance payment was dismissed.

In conclusion, both appeals by the assessee were partly allowed, with the addition on account of unproved purchases for A.Y. 2010-11 being restricted to 12.5% of disputed purchases and the addition of insurance payment for A.Y. 2011-12 being dismissed.