2012 (2) TMI 548 - AT - Income Tax

Tribunal Upholds CIT(A) Decision on Purchase Cost Adjustment, Disallowance Sustained, Revenue Appeal Dismissed

The Tribunal upheld the CIT (A)'s decision to add 30% of the purchase cost as a reasonable amount to cover the appellant's gain due to violations of ... Addition of bogus purchases and payments - Held that:- The present assessee who has been maintaining cash book, purchase register, sales register, stock register, ledger account etc., and also his case comes under the purview of the provisions of section 44AB Act. We are of the firm view that if the disallowance is restricted/sustained to the extent of 12.5% on account of the bogus purchases, it would meet the ends of justice. It is, therefore, ordered accordingly. Revenue’s appeal is dismissed. Issues involved:1. Addition of bogus purchases and payments for assessment year 2003-04 by the Revenue.2. Disallowance of purchases for assessment years 2003-04 and 2004-05 by the assessee.Issue 1: Addition of bogus purchases and payments for assessment year 2003-04 by the Revenue:The Revenue appealed against the deletion of an addition of Rs. 42,98,107 on account of bogus purchases and payments for the assessment year 2003-04. The CIT (A) confirmed 30% of the purchase cost as a reasonable amount to be added to cover the appellant's gain, considering violations of section 40A(3) and savings in statutory duties. The Revenue contended that the assessee failed to prove the genuineness of purchases and payments, citing precedents. The AR presented a detailed paper book to support the argument. The Tribunal reviewed past decisions on similar issues, including the Mardia Copper case, and upheld the CIT (A)'s decision of 30% addition to purchases, dismissing the Revenue's appeal.Issue 2: Disallowance of purchases for assessment years 2003-04 and 2004-05 by the assessee:The assessee challenged the disallowance of purchases for the assessment years 2003-04 and 2004-05. The CIT (A) confirmed the action of the AO in disallowing purchases to the extent of Rs. 18,42,045 and Rs. 2,07,140 for the respective years. The AR conceded that certain grounds were not pressed for adjudication. The Tribunal consolidated the issues raised by both parties as they were interlinked. The assessee maintained detailed records and came under section 44AB provisions. Citing previous decisions like Shanket Steel Traders case, the Tribunal sustained the disallowance at 12.5% of purchases, aligning with similar judgments. The Tribunal partially allowed the assessee's appeals for both assessment years while dismissing the Revenue's appeal for the assessment year 2003-04.This judgment provides a comprehensive analysis of the issues related to bogus purchases and payments, disallowance of purchases, and the application of relevant legal precedents to determine the final outcomes for both the Revenue and the assessee.