Appellate Tribunal adjusts purchase addition, provides relief to assessee in assessment appeal

The Appellate Tribunal partially allowed the assessee's appeal and dismissed the revenue's appeal regarding cross-appeals against the CIT(A)'s order for the assessment year 2011-12. The Tribunal reduced the addition to purchases from 25% to 12.5%, finding that although the assessee had utilized hawala entries for purchases without taking delivery of materials, the initial addition was excessive given the business nature and declared GP. This decision aimed to maintain consistency with past rulings, providing the assessee with relief. The Tribunal's judgment was delivered on 29th September 2017.

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Issues:
Cross-appeals against CIT(A)'s order for assessment year 2011-12 - Sole issue: confirmation of addition to purchases by CIT(A) - AO's addition of entire purchases due to lack of proof - CIT(A) upheld addition to 25% - Appellate Tribunal's decision on the extent of addition.

Analysis:
The case involved cross-appeals against the CIT(A)'s order for the assessment year 2011-12. The sole issue raised by the assessee was the confirmation of the addition to purchases by the CIT(A). The Assessing Officer (AO) had added the entire purchases to the total income of the assessee due to the lack of proof regarding the genuineness of the purchases and consumption of materials in manufacturing. The AO received information indicating that the assessee obtained accommodation entries for purchases through parties declared as hawala operators. The assessee, engaged in manufacturing and processing ferro and metal alloys, submitted various details and proofs to establish the genuineness of the purchases, but the AO remained unconvinced. Consequently, the AO assessed the total income at a higher amount.

In the appellate proceedings, the CIT(A) partly allowed the appeal after considering the submissions made by the assessee. The CIT(A) upheld the addition to purchases at 25%, citing the Gujarat High Court's decision in a similar case. The Appellate Tribunal, upon reviewing the case, found that the assessee had availed hawala entries for purchases without taking delivery of materials. However, considering the nature of the business and the GP declared by the assessee, the Tribunal deemed the 25% addition excessive. To maintain consistency with previous decisions, the Tribunal sustained a disallowance of 12.5% of the total purchases, providing the assessee with relief.

As a result, the appeal of the assessee was partly allowed, and that of the revenue was dismissed. The Tribunal's decision was pronounced in an open court on 29th September 2017.

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