Tribunal limits addition for alleged bogus purchases to 12.5% profit element.

ACIT, Circle- 15 (1) (2), Mumbai Versus M/s General Composites Pvt. Ltd.

ACIT, Circle- 15 (1) (2), Mumbai Versus M/s General Composites Pvt. Ltd. - TMI Issues:
Appeal against the order of the Ld. Commissioner of Income Tax (Appeals) pertaining to AY 2011-12 restricting addition on account of alleged bogus purchases.

Analysis:
1. The assessee declared total income for AY 2011-12 as Rs. 52,06,690. The case was reopened due to alleged accommodation purchase bills of Rs. 25,12,243 from six bogus parties. The assessment under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 determined total income at Rs. 58,35,500 after adding Rs. 6,28,810 under section 69C.

2. The revenue appealed the Ld. CIT(A)'s decision to restrict the addition to 12.5% of the disputed purchase amount. The revenue argued that the parties were found to be Hawala operators as per the Sales Tax Department and the Investigation Wing, thus a reasonable disallowance was made.

3. The revenue challenged the CIT(A)'s decision citing the Hon'ble Gujarat High Court's ruling in N K Protiens Ltd. case, which held that in cases of bogus purchases, the entire amount should be added. The revenue prayed for setting aside the CIT(A)'s order.

4. The appeal hearing took place, but the assessee did not appear. The Tribunal decided to proceed based on the material and the Departmental Representative's submissions.

5. The Departmental Representative argued that the assessee failed to prove the genuineness of the transactions and that the CIT(A)'s decision was not in line with legal precedents.

6. The Tribunal reviewed the case and found that the revenue's grievance was regarding the CIT(A)'s restriction of the addition to 12.5% of the bogus purchases. The CIT(A) based the decision on evidence provided by the assessee and the lack of effort to prove the genuineness of purchases.

7. The CIT(A) justified the restriction by stating that the assessee did not discharge the onus of proving the genuineness of purchases. The CIT(A) referenced reports from the Sales Tax Department and the lack of effort by the assessee to substantiate the transactions.

8. The Tribunal upheld the CIT(A)'s decision, citing the Hon'ble Gujarat High Court's ruling in Simit P. Seth case, which determined that only the profit element from bogus purchases should be considered for additions. The Tribunal found the CIT(A)'s decision well-reasoned and dismissed the revenue's appeal, upholding the CIT(A)'s findings.

In conclusion, the Tribunal dismissed the revenue's appeal for AY 2011-12, affirming the CIT(A)'s decision to restrict the addition on account of alleged bogus purchases to 12.5% of the total amount.