Tribunal decision: Partial appeal success on bogus purchases, VAT verification ordered

The Tribunal partially allowed the appeal challenging the addition of Rs. 1,15,990 on account of bogus purchases for the assessment year 2011-12. The Assessing Officer's decision to treat the purchases as non-genuine was upheld, but the addition was restricted to the profit element of 12.5%. The Tribunal directed the Assessing Officer to verify VAT payments by the assessee and reduce it from the addition made, sustaining the addition to the balance amount. The challenge against the levy of interest under various provisions of the Act was dismissed as interest was deemed mandatory and consequential.

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Issues involved:
Challenging order dated 7th November 2017 by Commissioner (Appeals) for assessment year 2011-12, addition of Rs. 1,15,990 on account of bogus purchases, benefit of VAT paid on alleged bogus purchases, levy of interest under various provisions of the Act.

Analysis:
1. The appeal was filed challenging the order passed by the Commissioner (Appeals) for the assessment year 2011-12. Grounds 1 to 4 were not pressed and hence dismissed.
2. Ground no. 5 involved the challenge against the addition of Rs. 1,15,990 on account of bogus purchases. The Assessing Officer reopened the assessment based on information received regarding purchases from a specific entity being non-genuine. Despite the assessee providing documentation, the Assessing Officer was not convinced and treated the purchases as non-genuine. However, considering the purchases were reflected in the books and necessary for sales, the addition was restricted to the profit element of 12.5%.
3. The assessee challenged the addition before the first appellate authority but was unsuccessful. The argument was made that the VAT paid on the alleged bogus purchases should be considered to reduce the profit element estimated at 12.5%.
4. The Tribunal considered the submissions and directed the Assessing Officer to verify the VAT payment by the assessee and reduce it from the addition made, sustaining the addition to the extent of the balance amount. This ground was partly allowed.
5. Ground no. 6 involved the challenge against the levy of interest under various provisions of the Act. The Tribunal noted that the levy of interest is mandatory and consequential, with interest under section 234C being charged based on the income returned by the assessee.
6. Grounds no. 7 and 8 were dismissed, with one being premature and the other being of a general nature. The result was that the assessee's appeal was partly allowed, with the order pronounced in open court on 19.09.2018.

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