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2022 (11) TMI 480 - HC - Income TaxEstimation of income - Bogus purchase - addition was made by the A.O. on the basis of credible information from the Sales Tax Department - HELD THAT - We are in agreement with the view expressed by the CIT (Appeals) that, if the purchases are bogus, it would be impossible for the assessee to complete the business transaction and that if the purchase is bogus, the corresponding sale also must be bogus or else the transaction would be impossible to complete and as a necessary corollary, unless the corresponding sale is held to be bogus, the purchase also cannot be held to be bogus, rather it would be a case of purchase from bogus entities/parties. That view has been upheld by the Tribunal in principal while dismissing the appeal of the Revenue. In view of the above, we are of the opinion that the questions of law proposed as (a), (b), and (c) in the appeal cannot be said to be substantial questions of law. GP estimation - Tribunal has not addressed the issue of adopting the gross profit rate of 5% on the alleged Hawala purchase as against the rate of 0.69% declared by the assessee, despite the fact that the CIT (Appeals) had specifically gone into that question in its order dated 18th August, 2015 and had directed the A.O. to make 5% addition in the gross profit ratio, while deleting the balance addition.
Issues:
1. Challenge to the order of the Income Tax Appellate Tribunal regarding alleged bogus purchases. 2. Justification for directing deletion of addition made on account of bogus purchase. 3. Burden of proof on the assessee regarding the veracity of impugned purchases. 4. Availability of parties for confirmation of impugned purchases. 5. Compliance with the Supreme Court's judgment on restricting addition for bogus purchases. 6. Calculation of gross profit rate discrepancy. Issue 1: Challenge to the ITAT Order Both appeals under Section 260A of the Income Tax Act challenged the ITAT's order dismissing appeals filed by the Revenue regarding alleged bogus purchases made by the assessee. Issue 2 & 3: Justification for Deletion of Addition The ITAT directed the Assessing Officer (A.O.) to delete the addition made on account of bogus purchases. The questions of law raised whether the ITAT was justified in doing so, considering the lack of substantiation or confirmation of the impugned purchases by the assessee during the assessment proceedings. Issue 4: Availability of Parties for Confirmation The ITAT was questioned for directing deletion of the addition without the parties from whom the impugned purchases were claimed to be made being available at their given addresses, and without the assessee producing such parties before the A.O. to confirm the veracity of the purchases. Issue 5: Compliance with Supreme Court's Judgment In light of a Supreme Court judgment, the ITAT was questioned for not restricting the addition made on account of 'Bogus Purchases' once it was found that the total amount represented alleged purchases from bogus suppliers. Issue 6: Gross Profit Rate Discrepancy The CIT (Appeals) estimated the gross profit rate at 5% instead of the 0.69% declared by the assessee, resulting in an addition to the gross profit ratio. The Tribunal did not address this discrepancy, leading to a remand of the matter back to the Tribunal for further consideration. In summary, the judgment involved challenges to the ITAT's order regarding alleged bogus purchases, with questions raised on the justification for deletion of the addition, burden of proof on the assessee, availability of parties for confirmation, compliance with a Supreme Court judgment, and a discrepancy in the calculation of the gross profit rate. The matter was remanded back to the Tribunal for reconsideration on the issue of the gross profit rate calculation.
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