2020 (4) TMI 365 - AT - Income Tax

Tax Tribunal Upholds Profit Rate Limitation on Alleged Bogus Purchases, Dismissing Revenue's Appeal for AY 2014-15.

The ITAT dismissed the revenue's appeal challenging the Ld. CIT(A)'s order for AY 2014-15, which restricted the addition on account of bogus purchases to ... Bogus purchases - CIT(A) restricting the addition @ 3% on total purchases as the profit element embedded in these purchases - HELD THAT:- We find that the identical ground raised in the present appeal has already been decided for the same AY 2014-15 in assessee’s own case [2019 (12) TMI 314 - ITAT MUMBAI] wherein held that CIT(A) had rightly appreciated that the addition in the hands of the assessee was liable to be restricted only to the extent of the profit element which was embedded in making of purchases from the open/grey market. Following the said decision, it can be safely concluded that the restriction placed by CIT(A) that the addition by estimating profit percentage at the rate of 3% on bogus purchases, is correct. - Decided against revenue. Issues Involved:Appeal against order of Ld. CIT(A) for AY 2014-15 - Addition on account of bogus purchases - Alleged suppliers providing accommodation entries - Restriction of addition to 3% on total purchases - Presumption of purchases from unknown parties - Applicability of section 69 of the IT Act, 1961 - Consideration of Hon'ble Supreme Court order - Appeal grounds by revenue - Coordinate Bench decision in assessee's own case - Dismissal of appeal by ITAT.Detailed Analysis:1. Addition on Account of Bogus Purchases:The appeal was filed by the revenue challenging the order of Ld. CIT(A) for AY 2014-15 regarding the addition on account of bogus purchases made by the assessee. The case involved the assessee, engaged in trading of rough and polished diamonds, who had taken accommodation entries of purchases from certain entities. The Ld. AO had determined the total income by estimating profit margin at 100% on such purchases. The Ld. CIT(A) partly allowed the appeal filed by the assessee. The revenue raised grounds questioning the restriction of the addition to 3% on total purchases and the profit element embedded in these purchases provided by accommodation entry providers.2. Presumption of Purchases from Unknown Parties:One of the issues raised by the revenue was the presumption made by the Ld. CIT(A) regarding purchases being made from unknown parties, despite bills being received from accommodation entry providers. The revenue argued that this presumption was not adequately clarified by the Ld. CIT(A), and the applicability of section 69 of the IT Act, 1961 was questioned in this context.3. Consideration of Hon'ble Supreme Court Order:Another ground raised in the appeal was the failure of Ld. CIT(A) to consider the order of the Hon'ble Supreme Court in a similar case of bogus purchases. The revenue contended that the Ld. CIT(A) should have taken into account the Supreme Court's decision, which was already the law of the land at the time of pronouncing the order.4. Coordinate Bench Decision and Dismissal of Appeal:During the proceedings, the Ld. AR for the assessee pointed out that the issues raised by the revenue were already addressed in a Coordinate Bench decision of the ITAT in the assessee's own case for the same assessment year. The ITAT had dismissed the appeal on the grounds of merit, confirming the profit rate at 3% for the bogus purchases. The ITAT, in line with the earlier decision, dismissed the revenue's appeal, stating that the grounds raised were already decided in the assessee's previous case.5. Final Decision and Dismissal of Appeal:After hearing both parties and reviewing the material and orders, the ITAT concluded that the grounds raised by the revenue were already addressed in the Coordinate Bench decision applicable to the present case. Therefore, the ITAT dismissed the appeal filed by the revenue, following the earlier decision and upholding the restriction of the addition on account of bogus purchases to 3% of the total purchases. The appeal filed by the revenue was ultimately dismissed by the ITAT.This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive overview of the arguments presented, decisions made, and the final outcome of the appeal.