Tribunal directs retention of 9.25% addition, rejects double addition claim, upholds CIT(A)'s decision. Assessee's opportunity argument dismissed.

The Tribunal partially allowed the appeal by directing the AO to retain the addition at 9.25% of Rs. 2.44 crores (Rs. 22,57,000) and delete the balance addition of Rs. 2,21,43,000. The Tribunal rejected the claim of double addition and upheld the CIT(A)'s decision to reject the reduction in closing stock. The assessee's argument regarding lack of opportunity before the CIT(A) was dismissed.

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Issues Involved:
1. Addition of Rs. 2.44 crores to the assessee's income on account of bogus purchases.
2. Rejection of the claim for reduction of closing stock by Rs. 2.44 crores.
3. Alleged double addition of Rs. 2.44 crores.
4. Proper opportunity not given to the assessee by CIT(A).

Issue-wise Detailed Analysis:

1. Addition of Rs. 2.44 crores to the assessee's income on account of bogus purchases:
The core issue in this appeal is the addition of Rs. 2.44 crores made by the Assessing Officer (AO) and upheld by the CIT(A) concerning the closing stock. During the search under section 132 of the Income Tax Act, 1961, it was discovered that the assessee had made purchases from three different parties, which were found to be bogus. The AO concluded that the assessee received cash back after making payments by cheque, thus claiming bogus purchases amounting to Rs. 2.44 crores. The CIT(A) confirmed this addition, noting that the assessee had admitted to the bogus purchases and had filed a revised return adding back the bogus purchases to its profits.

2. Rejection of the claim for reduction of closing stock by Rs. 2.44 crores:
The assessee argued that since the bogus purchases were added back to the income, the closing stock should be reduced by the same amount to avoid double taxation. However, the CIT(A) rejected this claim, stating that the closing stock could only be reduced if the appellant could establish that the closing stock valuation was as per a stock register, which the appellant failed to produce. The Tax Audit Report also indicated that no stock book was maintained, and quantity-wise sales turnover was not recorded. Additionally, the audited balance sheet for the subsequent year showed the closing stock as Rs. 4,74,01,230/-, not reduced by Rs. 2.44 crores, further proving the false claim of reduction in closing stock.

3. Alleged double addition of Rs. 2.44 crores:
The assessee contended that there was a double addition since the bogus purchases were already added back to the income, and the closing stock was not adjusted accordingly. The CIT(A) and the Tribunal found no merit in this argument, as the assessee could not prove that the bogus purchases were carried in the closing stock. The Tribunal noted that the opening stock for the subsequent year was shown as Rs. 4,74,01,230/-, and no inventory details were provided to substantiate the claim. Therefore, the claim of double addition was rejected.

4. Proper opportunity not given to the assessee by CIT(A):
The assessee argued that the CIT(A) did not provide a proper opportunity to present its case, thus violating the principles of natural justice. However, this contention was not argued during the proceedings before the CIT(A) and was therefore rejected by the Tribunal.

Conclusion:
The Tribunal partially allowed the appeal by directing the AO to retain the addition at 9.25% of Rs. 2.44 crores (Rs. 22,57,000) and delete the balance addition of Rs. 2,21,43,000. This decision was based on the principle that only the gross profit embedded in the bogus purchases should be added if the sales are not doubted. The Tribunal found no merit in the claim of double addition and upheld the CIT(A)'s order rejecting the reduction in closing stock.

Pronouncement:
The decision was pronounced on 24.12.2020.

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