2023 (8) TMI 1064 - AT - Income Tax

Tribunal limits bogus purchase addition under Income Tax Act, directs 2.5% cap

Dharmesh Vinaykumar Shah Versus Income Tax Officer Ward–41 (2) (1), Mumbai

Dharmesh Vinaykumar Shah Versus Income Tax Officer Ward–41 (2) (1), Mumbai - TMI Issues involved: Appeal challenging order u/s 250 of the Income Tax Act, 1961 by CIT(A) for AY 2009-10.Issue 1: Addition on account of bogus purchasesThe assessee disputed the addition of Rs. 96,79,247 made under Section 69C for alleged bogus purchases. The parties from whom purchases were made were found to be engaged in providing accommodation entries. The AO treated the entire purchase amount as bogus/non-genuine, adding it to the total income of the assessee. The CIT(A) dismissed the appeal, leading to the current appeal.Details: The assessee, a proprietor of a trading business, filed returns declaring income. Information from the Sales Tax Department revealed suspicious parties providing accommodation entries. The parties listed by the assessee for purchases were among those flagged. Despite notices issued to these parties, no genuine concern was found at their addresses. The AO treated the purchases as unexplained expenditure under section 69C, which the CIT(A) upheld.Decision: The Tribunal referred to a similar case where the addition for non-genuine purchases was restricted to 2.5%. Considering the facts and circumstances, the Tribunal directed the AO to limit the addition to 2.5% of the alleged bogus purchases. The Tribunal noted that corresponding sales by the assessee were not doubted by the Revenue, leading to the decision to restrict the addition. The appeal was partly allowed, and the decision was pronounced on 27/07/2023.