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2024 (9) TMI 972 - HC - Income TaxEstimation of income - bogus purchases - ITAT restricted addition to 6% - HELD THAT - Addition at 5% of bogus purchase / accommodation entries on account of bogus purchase relying on the judgement of Pankaj K. Choudhary 2023 (3) TMI 1402 - GUJARAT HIGH COURT No substantial question of law.
Issues Involved:
1. Justification of ITAT in restricting the addition from 100% to 6% of bogus purchases. 2. Consideration of the role of Shri Bhanwarlal Jain in the accommodation entry business. 3. Relevance of the Gujarat High Court judgment in N.K. Industries Ltd. vs. DCIT. 4. Relevance of the Calcutta High Court judgment in PCTT vs. Premlata Tekriwal. 5. Comparison with the judgment in the case of Mayank Diamonds Pvt Ltd. Detailed Analysis: Issue 1: Justification of ITAT in Restricting Addition to 6% of Bogus Purchases The court examined whether the ITAT was justified in reducing the addition made by the AO from 100% to 6% of the bogus purchases. The Tribunal had relied on the judgment in the case of Pankaj K. Choudhary, where a similar situation was adjudicated, and the addition was restricted to 6%. The Tribunal noted that the AO had not conducted an independent investigation and had solely relied on the report of the Investigation Wing. The Tribunal also observed that the AO did not dispute the sales of the assessee, which indicated that the purchases, though unverifiable, were likely made from other sources. Thus, the court upheld the Tribunal's decision to restrict the addition to 6%. Issue 2: Role of Shri Bhanwarlal Jain in Accommodation Entry Business The court considered the role of Shri Bhanwarlal Jain, who was identified as running bogus entities and providing accommodation entries. The AO had concluded that the assessee was a beneficiary of these entries. However, the Tribunal found that the AO had not provided concrete evidence linking the assessee directly to the accommodation entries provided by Shri Bhanwarlal Jain. The Tribunal's decision to restrict the addition to 6% was based on the lack of specific evidence against the assessee and the general practice of making a reasonable estimate of profit in such cases. Issue 3: Relevance of Gujarat High Court Judgment in N.K. Industries Ltd. vs. DCIT The court examined whether the ITAT had erred in not considering the judgment in N.K. Industries Ltd. vs. DCIT, where the Gujarat High Court had upheld the addition of 100% of purchases from bogus parties. The Tribunal distinguished the present case from N.K. Industries Ltd., noting that in the latter, the facts were different, and the addition was made based on specific findings. In contrast, the present case lacked such specific findings, and the Tribunal's decision to restrict the addition to 6% was deemed appropriate based on the available evidence. Issue 4: Relevance of Calcutta High Court Judgment in PCTT vs. Premlata Tekriwal The court also considered the relevance of the Calcutta High Court judgment in PCTT vs. Premlata Tekriwal, which held that the entire amount of bogus expenditure should be added to the income of the assessee. The Tribunal found that the facts of the present case were different from those in Premlata Tekriwal. The Tribunal emphasized that the AO had not conducted an independent investigation and had not disputed the sales, which justified restricting the addition to 6%. Issue 5: Comparison with the Judgment in Mayank Diamonds Pvt Ltd The court reviewed the comparison with the judgment in the case of Mayank Diamonds Pvt Ltd, where the Gujarat High Court had directed an addition at the rate of 5% of the total turnover. The Tribunal had considered this judgment and noted that the facts of the present case were more aligned with those in Pankaj K. Choudhary, where the addition was restricted to 6%. The Tribunal's decision to follow the precedent set in Pankaj K. Choudhary was deemed appropriate. Conclusion: The court concluded that the questions raised by the Revenue were already settled by the Coordinate Bench in the case of Pankaj K. Choudhary. The Tribunal's decision to restrict the addition to 6% was consistent with the established precedent and the facts of the case. Therefore, the court dismissed the present Tax Appeals, finding no substantial questions of law arising from the appeals.
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