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Facts
The assessee filed its return of income which was processed under section 143(1). Subsequently, the assessment was reopened based on information that the assessee had used bogus purchase bills. The AO made an addition of 25% on the alleged bogus purchases.
Held
The Tribunal held that the AO neither rejected the books of accounts nor specified the section under which the addition was made. The bills may be bogus but the purchases were genuine as sales were accepted. Therefore, the addition should be restricted to 12.5% of the alleged bogus purchases.
Key Issues
Whether the addition on account of alleged bogus purchases should be restricted to 12.5% of the bogus purchases.
Sections Cited
143(1), 133(6)
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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HON’BLE & SHRI SUNIL KUMAR SINGH, HON’BLE
सुनवाई की तारीख/Date of Hearing : 05/11/2024 घोषणा की तारीख/Date of Pronouncement : 08/11/2024 आदेश/O R D E R
PER NARENDRA KUMAR BILLAIYA, AM:
This appeal by the assessee is preferred against the order of the ld. CIT(A)/Addl./JCIT-(4), Kolkata, dated 29/01/2024 [hereinafter ‘ld. CIT(A)’] pertaining to AY 2010-11.
Delay of 83 days is condoned. 3. The sum and substance of the grievance of the assessee is that the ld. CIT(A) erred in enhancing the assessment to 100% of the alleged bogus purchases on which the AO has made addition of 25%. 3.1. Briefly stated the facts of the case are that the assessee electronically filed its return of income on 15/10/2010 declaring total income at Rs. 5,99,826/-. The return was processed u/s 143(1) of the Act and the returned income was accepted. 4. Subsequently, on the basis of information that the assessee is indulged in showing bogus purchase by taking accommodation/fictitious 2 bills from certain entities/parties, the assessment was reopened and statutory notices were accordingly issued and served upon the assessee. 4.1. During the course of scrutiny assessment proceedings, the assessee was asked to explain and furnish details of the genuineness of transactions with following parties:-
4.2. The AO further issued notice u/s 133(6) of the Act to all the above parties but received no reply from any. 4.2.1. When the assessee was confronted with this, it replied that these people are not traceable at present and hence it is unable to produce them for verification. The AO formed a belief that the purchases from the aforementioned parties are bogus and drawing support from various judicial decisions, the AO made addition of Rs. 4,02,359/- being 25% of the alleged bogus purchases. 4.3. Assessee carried the matter before the ld. CIT(A) and reiterated that the purchases are genuine.
After considering the facts and the submissions, the ld. CIT(A) was of the opinion that the AO erred in making addition @25% of the bogus purchases whereas, the addition should have been made @100% of the alleged bogus purchases and enhanced the assessment by making addition of Rs. 16,09,434/-.