Tribunal adjusts profit element, reduces bogus purchase addition from work in progress value.

ACIT 12 (3) (2), Mumbai Versus M/s. Lashkaria Construction Pvt. Ltd.

ACIT 12 (3) (2), Mumbai Versus M/s. Lashkaria Construction Pvt. Ltd. - Tmi Issues:
1. Dispute over relief granted by CIT(A) regarding bogus purchases.
2. Allegation of bogus purchases by the Assessing Officer.
3. Justification of addition made by the Assessing Officer.
4. Examination of evidence by the Assessing Officer.
5. Cross-examination of parties by the Assessing Officer.
6. Consideration of profit element in alleged bogus purchases.
7. Reduction of profit amount from work in progress.

Analysis:

Issue 1: The appeal by the Revenue and cross objection by the assessee pertain to the relief granted by the CIT(A) in relation to the addition made by the Assessing Officer for bogus purchases. The Revenue is displeased with the CIT(A)'s decision to grant 90% relief, while the assessee is dissatisfied with the remaining 10% addition.

Issue 2: The Assessing Officer alleged that the assessee made bogus purchases amounting to Rs. 584.43 lakhs based on information from the sales tax department. Notices sent to the parties were returned unserved, leading the Assessing Officer to disallow the purchases and add the amount to the total income of the assessee.

Issue 3: The Assessing Officer justified the addition by claiming that the assessee failed to provide reconciliation of purchases and did not establish the genuineness of the transactions. The Assessing Officer contended that purchases from identified parties were bogus, resulting in the addition to the total income.

Issue 4: The assessee argued before the CIT(A) that it had submitted various documents to prove the authenticity of the purchases, including invoices, payment details, ledger accounts, and delivery challans. The Assessing Officer was criticized for not examining the evidence and making the addition without sufficient inquiry.

Issue 5: The assessee further contended that the Assessing Officer did not provide copies of statements or allow cross-examination of the parties involved. The lack of opportunity for cross-examination was highlighted as a flaw in the assessment process, questioning the validity of the addition.

Issue 6: The CIT(A) opined that only the profit element from the alleged bogus purchases should be added to the income, citing precedents where only the profit was taxable in such cases. The CIT(A) directed the Assessing Officer to add 10% of the alleged bogus purchases as the profit element.

Issue 7: The Tribunal modified the CIT(A)'s order, estimating the profit element at 8% of the value of the alleged bogus purchases. The profit amount was directed to be reduced from the value of work in progress instead of being assessed during the relevant year, considering the ongoing construction project.

In conclusion, the Tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross objection, emphasizing the assessment of the profit element in alleged bogus purchases and its adjustment against the work in progress value.