2023 (10) TMI 1022 - AT - Income Tax

Condonation of delay filling appeal - delay by 1,200 days - HELD THAT - We find that substantial part of the delay is covered by COVID-19 period and whatever remaining period was there that is on account of non-supplying of copy of the appellate order to the assessee by the first appellate authority despite repeated communications. In our opinion, the delay in filing the appeal cannot be attributed to the assessee as the assessee was not having the copy of appellate order. Besides, the assessee has not gained anything in any manner whatsoever by delayed filing of the appeal. In our opinion, the substantial delay was for COVID pandemic and other technicalities and therefore the assessee needs to be given a fair chance to represent its case on merit. Considering these facts, we are inclined to condone the delay and admit the appeal for adjudication. Estimation of income - Bogus purchases - AO after receiving information from DDIT (Inv.), Kolkata that Sri Sanjiw Kumar Singh is providing accommodation entries and the assessee is the beneficiary of the same - HELD THAT - As in the case of bogus purchases the entire purchases cannot be added to the income and only profit element embedded in the said purchases can be added. In the similar type of cases, the various Coordinate Benches have held that where the assessee has obtained bogus bills of purchases and the purchases were in fact made from the other suppliers i.e grey market thereby making the savings in respect of VAT and other additional expenses and therefore, the assessee earns more than the normal profits. In the present case the assessee has duly furnished bills and vouchers and the material was consumed in the manufacturing process. Since the assessee has failed to offer any cogent and convincing reply about the goods being received by the assessee with necessary evidences, we deem it fit to make a reasonable disallowance of 5% on account of profit element. Appeal filed by the assessee is partly allowed.

Summary

Issues involved: Appeal against confirmation of addition of Rs. 7,27,536/- on account of bogus purchases.

Issue 1: Condonation of Delay

The appeal was delayed by 1,200 days due to non-receipt of the appellate order. The delay was partly due to the COVID-19 period and the failure of the first appellate authority to supply the copy of the order despite repeated requests. The Tribunal found that the delay was not attributable to the assessee, who only became aware of the order in March 2021. Considering the circumstances, the Tribunal decided to condone the delay and admit the appeal for adjudication.

Issue 2: Addition of Rs. 7,27,536/- on Account of Bogus Purchases

The Assessing Officer (AO) added the entire amount of Rs. 7,27,536/- to the income of the assessee as bogus purchases, based on information received regarding accommodation entries provided by a third party. The AO found that the assessee failed to produce sufficient evidence to prove the legitimacy of the purchases. The Commissioner of Income-tax (Appeals) upheld the AO's decision.

Judgment:

After reviewing the facts, the Tribunal noted that the assessee is engaged in manufacturing electrical goods and aluminum items. It was observed that the purchases were made from entities controlled by a party providing accommodation entries. The assessee provided bills and vouchers but did not respond to the show cause notice. The Tribunal held that in cases of bogus purchases, only the profit element should be added to income. Citing precedents, the Tribunal decided to make a reasonable disallowance of 5% on the profit element of the purchases. Consequently, the Tribunal modified the order of the Commissioner and directed the AO to sustain the addition to the extent of 5% of the bogus purchases.

Conclusion:

The Tribunal partly allowed the appeal filed by the assessee, modifying the addition on account of bogus purchases to 5% of the total amount.