2023 (9) TMI 1174 - HC - Income Tax

Estimation of income - bogus purchases - ITAT reduced the disallowance from 12.5% to 6% - Tribunal noted that the issue under consideration was squarely covered by the judgement of the coordinate bench in the case of Pankaj A Chaudhary 2023 (3) TMI 1402 - GUJARAT HIGH COURT wherein the coordinate bench at Surat had sustained the addition at the rate of 6% of bogus purchases - HELD THAT - The view taken and the conclusion arrived at by the appellant Tribunal in case supra are based on material before it and after analysing the facts and figure available before it. When the Tribunal has thought it fit to reduce the disallowance at 6% from 12.5%, the Tribunal had before it the facts which were duly analysed by it. No interference is called for in the said conclusion and findings of the Tribunal in the present appeal by this court. No substantial question of law arises

Summary

Issues:
The judgment involves the estimation of addition in respect of bogus purchases at a certain percentage, based on the facts and circumstances of the case and relevant legal precedents.

Estimation of Addition in Respect of Bogus Purchases:
The case pertains to an individual engaged in the trading activity of diamonds, where the assessee's purchases were found to be sham transactions fabricated through bogus paper concerns. The Tribunal estimated the addition in respect of these bogus purchases at 6% of the total amount, differing from the disallowance made by the Assessing Officer at 100%. The Tribunal's decision was based on previous judgments and the argument that only the income component of the disputed transaction should be taxed to prevent revenue leakage.

Comparison with Previous Judgments:
The Tribunal's decision was influenced by a previous case involving a similar issue where the addition was restricted to 5% of the total turnover. The Tribunal considered the facts and circumstances of the present case, including the gross profit percentage and net profit declared by the assessee, to arrive at the conclusion that a disallowance at 6% of the disputed purchases would be sufficient to prevent revenue leakage.

Judicial Precedents and Coordinated Bench Decisions:
The Tribunal's decision was also supported by a coordinated bench decision that upheld the addition at the rate of 6% of bogus purchases in a similar case. Additionally, a separate judgment involving the same group providing accommodation entries ruled in favor of the assessee, highlighting the consistency in decisions related to cases involving the group in question.

Conclusion:
Based on the oral order passed by the court in a similar appeal, it was determined that no substantial question of law arose in the present appeals. The court found no merit in the appeals and dismissed them accordingly, without imposing any costs.