2024 (7) TMI 793 - HC - Income Tax

Estimation of income - Bogus purchases - CIT(A) restricting addition to 13.05% of the gross profit as confirmed by ITAT - HELD THAT - As in view of the concurrent finding of facts arrived at by both CIT(A) and the Tribunal as relying on case laws Simit P. Sheth ( 2013 (10) TMI 1028 - GUJARAT HIGH COURT ) and Nickunj Eximp Enterprises Pvt. 2014 (7) TMI 559 - BOMBAY HIGH COURT We are of the opinion that no question of law, much less any substantial question of law arises from the impugned Judgment and Order of the Tribunal.

Issues Involved:
1. Genuineness of transactions with M/s. Dhaval Gems and M/s. Veer Corporation.
2. Restriction of addition on bogus purchases from 100% to 13.05%.
3. Addition of Rs. 80,00,000/- cash deposit during demonetization.

Issue-wise Detailed Analysis:

1. Genuineness of Transactions with M/s. Dhaval Gems and M/s. Veer Corporation:
The Revenue questioned whether the ITAT was justified in agreeing with the CIT(A) without appreciating that the assessee failed to prove the genuineness of transactions with M/s. Dhaval Gems and M/s. Veer Corporation, identified as bogus entry providers controlled by Shri Chetan Kantilal Shah. The Tribunal found that the Assessing Officer (AO) erroneously added 100% of the purchases as bogus. The AO's decision was based on information from the Investigation Wing, which suggested that the transactions were not genuine. However, the Tribunal noted that the AO accepted the sales figures without questioning them and did not provide any adverse findings on the inventory. The CIT(A) observed that the entire purchases could not be disallowed without also ignoring the corresponding sales, which the AO failed to do. The CIT(A) thus restricted the addition to 13.05% of the gross profit, aligning with judicial precedents that only a profit element should be added when corresponding sales are not challenged.

2. Restriction of Addition on Bogus Purchases from 100% to 13.05%:
The Tribunal upheld the CIT(A)'s decision to restrict the addition from 100% to 13.05% of the bogus purchases. The CIT(A) based this on the gross profit rate for the year under consideration. The Tribunal agreed with the CIT(A) that the AO could not disallow the entire purchases without affecting the corresponding sales. The CIT(A) relied on various High Court and Tribunal decisions, which supported adding only a certain gross profit element to the total income instead of the entire purchase amount. The Tribunal found no infirmity in the CIT(A)'s conclusion and upheld the order, dismissing the Revenue's grounds of appeal.

3. Addition of Rs. 80,00,000/- Cash Deposit During Demonetization:
The Revenue questioned whether the ITAT was justified in deleting the addition of Rs. 80,00,000/- cash deposit during demonetization, arguing that it was over and above the disclosure made under the Pradhan Mantri Garib Kalyan Yojna (PMGKY). The Tribunal noted that the AO added Rs. 80,00,000/- as unexplained money under Section 69A of the Income-Tax Act, 1961, due to insufficient documentation from the assessee. However, the CIT(A) found that the assessee had disclosed the amount under the PMGKY scheme and paid due taxes. The Tribunal observed that the assessee had sufficient cash on hand, as per the cash book, to cover the deposit during demonetization. The Tribunal found that the CIT(A) correctly deleted the addition, as the amount deposited was part of the disclosure under the PMGKY scheme. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's grounds of appeal.

Conclusion:
The High Court dismissed the Revenue's appeal, finding no substantial question of law in the Tribunal's judgment. The concurrent findings of fact by the CIT(A) and the Tribunal were upheld, affirming the restriction of the addition on bogus purchases to 13.05% and the deletion of the Rs. 80,00,000/- cash deposit addition during demonetization.

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