2020 (7) TMI 600 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on alleged bogus purchases, restricts addition to 12.5%. Assessing officer's verification faulted.

ACIT Circle 6 (3) (2), Mumbai Versus M/s Jeevandeep Prakashan Pvt. Ltd.

ACIT Circle 6 (3) (2), Mumbai Versus M/s Jeevandeep Prakashan Pvt. Ltd. - TMI Issues: Reopening of assessment based on information received, disallowance of purchases as bogus, restriction of addition to 12.5% by CIT(A), adequacy of evidence provided by assessee, applicability of VAT and other charges.Analysis:1. The appeal by the revenue was against the order of the Commissioner of Income-tax Appeals for Assessment Year 2010-11. The case involved the reassessment of the assessee, a company engaged in the publication of educational books, due to information received regarding certain dealers providing accommodation entries without actual delivery of goods, with the assessee being a beneficiary. The Assessing Officer disallowed purchases from a specific company as bogus based on various decisions of higher courts.2. The CIT(A) restricted the addition to 12.5% of the purchases, citing a decision of the Gujarat High Court. The revenue's main ground of appeal was the restriction of the disallowance. The revenue argued that the entire purchases should be disallowed as the assessee failed to prove their genuineness, while the assessee contended that the purchases were for distributing diaries to customers and provided evidence of payments and ledger accounts.3. The Tribunal noted that the Assessing Officer did not refer to the assessee's reply or conduct an independent investigation. Despite the assessee providing evidence of payments through banking channels and ledger accounts, the Assessing Officer did not present any adverse material. The Tribunal found no infirmity in the CIT(A)'s decision to restrict the addition to 12.5% of the alleged bogus purchases, considering the element of avoidance of VAT and other charges embedded in such purchases.4. Ultimately, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s order. The Tribunal found that the assessing officer did not adequately verify whether the diaries were actually distributed, and the CIT(A) appropriately considered the evidence provided by the assessee in reaching the decision to restrict the addition. The order was pronounced in open court on 21/07/2020.