Tribunal Limits Addition on Alleged Bogus Purchases, Dismisses Revenue's Appeals

The Tribunal allowed the assessee's appeals in part by restricting the addition to 2% of alleged bogus purchases and ensuring no double addition for purchases from M/s. Sai International Impex. The revenue's appeals were dismissed.

---

---

Issues Involved:
1. Addition on account of alleged bogus purchases.
2. Double addition of purchases from M/s. Sai International Impex.

Detailed Analysis:

1. Addition on account of alleged bogus purchases:
The primary grievance of both the assessee and the revenue pertains to the addition made and partly deleted on account of alleged bogus purchases. Following a search and seizure action on the Ushdev group, evidence indicated that the assessee and its group concerns had taken accommodation entries from various concerns. The Assessing Officer (AO) added the entire amount of purchases totaling Rs. 42,51,60,782/- on the grounds of unsubstantiated claims and lack of proof regarding the genuineness of the purchases.

The Commissioner of Income Tax (Appeals) [CIT(A)] restricted the addition to 12.5% of the Gross Profit (GP) after considering the documents filed by the assessee and various judicial pronouncements. The CIT(A) directed the AO to compute additional profits by adopting a rate of 12.5% for purchases from the alleged bogus suppliers, allowing a set-off of the GP already shown by the assessee.

The Tribunal, upon reviewing the case, noted that the assessee was engaged in trading steel items and had entered into bogus transactions. The assessee submitted quantitative details of purchases and sales, bank statements, and payment details to substantiate the purchases. However, the AO was unsatisfied and added the entire amount of such purchases to the assessee’s income.

The Tribunal considered the order of the CIT(A) and various judicial precedents, including the case of M/s. Sanket Steel Traders and CIT Vs. Simit Sheth. The Tribunal found that the facts of the present case were distinct from those precedents due to differences in business operations and the absence of supplier statements denying the supply of goods.

The Tribunal also reviewed decisions in similar cases, such as Suman Gupta, where disallowance was upheld to the extent of 2% of the alleged bogus purchases. The Tribunal emphasized that the assessee maintained quantitative records, paid VAT, and made payments through account payee cheques, which were properly recorded.

2. Double addition of purchases from M/s. Sai International Impex:
The assessee contended that there was a double addition of Rs. 1,17,13,996/- for purchases from M/s. Sai International Impex. The CIT(A) directed the AO to verify this claim and ensure no double addition occurred.

The Tribunal, referencing its own decision in the assessee’s case for A.Y. 2010-11, where a similar issue was addressed, upheld the addition to the extent of 2% of the bogus purchases. The Tribunal noted that the assessee had shown a consistent GP rate on both normal and alleged bogus purchases, and the difference in margin was minimal.

The Tribunal directed the AO to restrict the addition to 2% of the bogus purchases, aligning with the Tribunal’s previous decision in the assessee’s case and ensuring no double addition for purchases from M/s. Sai International Impex.

Conclusion:
The Tribunal concluded by allowing the assessee’s appeals in part, directing the AO to restrict the addition to 2% of the bogus purchases and ensuring no double addition for purchases from M/s. Sai International Impex. The revenue’s appeals were dismissed. The order was pronounced in the open court on 11/09/2019.

---