Tribunal limits bogus purchase addition under Income Tax Act, directs 2.5% cap The Tribunal partially allowed the appeal challenging the addition of Rs. 96,79,247 on account of alleged bogus purchases under Section 69C of the Income ...
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Tribunal limits bogus purchase addition under Income Tax Act, directs 2.5% cap
The Tribunal partially allowed the appeal challenging the addition of Rs. 96,79,247 on account of alleged bogus purchases under Section 69C of the Income Tax Act, 1961. The Tribunal directed the Assessing Officer to limit the addition to 2.5% of the disputed amount, considering that the corresponding sales by the assessee were not in question. The decision was based on similar cases and the lack of evidence regarding the genuineness of the purchases, ultimately leading to the partial success of the appeal.
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 purchases
The 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.
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