Revenue partially wins appeal on bogus purchases, assessee's appeal dismissed for AY 2013-14. Enhanced additions to 6%.

The revenue's appeal was partly allowed, and the assessee's appeal was dismissed in a case concerning additions on account of alleged bogus purchases for AY 2013-14. The Ld. CIT(A) partially allowed the assessee's contentions, reducing the additions to 3%. However, after considering arguments and evidence, the additions were enhanced to 6% of alleged bogus purchases due to doubts raised regarding the transactions. The modified order was pronounced on December 13, 2017.

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Issues:
Cross appeals by assessee and revenue for AY 2013-14 regarding confirmation of additions on account of bogus purchases.

Analysis:
1. The appeals contested the order of Ld. CIT(A) regarding certain additions on account of alleged bogus purchases. The revenue's appeal was delayed, but the correct date of communication was established. The assessee did not object to the delay.

2.1. The assessee, engaged in manufacturing and exporting diamond studded jewelry, was assessed for AY 2013-14 with an addition for alleged bogus purchases. The total purchases were noted at Rs. 5,87,40,062 from seven concerns linked to accommodation/bogus bills.

2.2. The purchases were made from entities controlled by a group involved in accommodation bills. The details were extracted by Ld. AO in the assessment order.

2.3. A search/survey on the group revealed their involvement in accommodation bills and loans. The firms were found to be operating under the group's control without actual business activities.

2.4. The assessee failed to substantiate the purchase transactions, leading Ld. AO to estimate additions at 12.5% of alleged bogus purchases, amounting to Rs. 73,42,508.

3. Ld. CIT(A) partially allowed the assessee's contentions, reducing the additions to 3%. Both parties appealed against this decision.

4. The Ld. DR argued that the assessee knowingly engaged with entities linked to accommodation bills to evade taxes. The group admitted to fraudulent activities during search/survey operations.

5. The Ld. AR contended that the assessee had sufficient documentary evidence for the transactions, with payments through banking channels and proper accounting in books.

6. After considering the arguments and evidence, it was found that the assessee's transactions with the group raised doubts. The estimation of income was necessary to account for profits from possible grey market purchases and VAT benefits. The additions were enhanced to 6% of alleged bogus purchases.

7. Consequently, the revenue's appeal was partly allowed, and the assessee's appeal was dismissed. The modified order was pronounced on December 13, 2017.

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