2024 (9) TMI 481 - AT - Income Tax

Estimation of income - bogus purchases - Restricting addition to the extent @12.5% of the bogus purchases considering profit element embedded - HELD THAT - We found that the CIT(A) has dealt on the facts and considered the Hon ble High Court decision and took a view. We find in the case of Pooja Paper Trading Co. 2019 (3) TMI 62 - BOMBAY HIGH COURT and Simit P Sheth 2013 (10) TMI 1028 - GUJARAT HIGH COURT has considered the profit element embedded in the transaction. CIT(A) took a reasonable view that the only profit percentage has to be added and estimated @ 12.5% of bogus purchases. DR could not controvert the observations of the CIT(A) with any new cogent evidence and material but relied only on the AO order. We find that the CIT(A) has dealt on the facts and considered the profit element in the bogus purchases and also the A.O has not disputed the sales. CIT(A) has relied on the decisions of Hon ble High Court and passed a reasoned order. Accordingly, we do not find any infirmity in the order of the CIT(A) and uphold the same and dismiss the grounds of appeal raised by the revenue.

Summary

Issues:
1. Disallowance of purchases from non-existent vendors.
2. Failure to establish the genuineness of purchases.
3. Burden of proof on the assessee regarding expenses.
4. Lack of supporting documents for purchases.
5. Justification for disallowance of unverifiable purchases.

Analysis:
1. The revenue appealed against the CIT(A)'s order regarding the disallowance of purchases from non-existent vendors. The revenue contended that the CIT(A) should have disallowed such purchases entirely. The issue revolved around the genuineness of the purchases and the legal correctness of disallowing them.

2. The case involved the failure of the assessee to establish the genuineness of purchases from non-existent vendors. The Assessing Officer (A.O.) observed discrepancies in the purchase bills obtained by the assessee, leading to suspicions of bogus transactions. The A.O. initiated proceedings under section 148 of the Income Tax Act, ultimately resulting in an addition to the total income of the assessee.

3. The CIT(A) considered the burden of proof on the assessee regarding expenses, particularly purchases from non-existent vendors. The CIT(A) analyzed the submissions, findings of the A.O., and relevant judicial decisions to determine the extent of disallowance. The CIT(A) partially allowed the assessee's appeal by restricting the addition to 12.5% of the bogus purchases.

4. The revenue challenged the CIT(A)'s order before the Tribunal, arguing that the addition should not have been restricted to 12.5% without sufficient information in the assessment proceedings. The Tribunal examined the facts, including the profit element embedded in the transactions, and referred to relevant High Court decisions to uphold the CIT(A)'s reasoning.

5. The Tribunal found that the CIT(A) had reasonably considered the profit element in the bogus purchases and made a justified decision to restrict the addition to 12.5% of such purchases. The Tribunal noted that the CIT(A) had properly analyzed the facts, considered judicial precedents, and the A.O. had not contested the sales aspect. Consequently, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s order based on sound reasoning and legal principles.