Tribunal Condones 1,200-Day Delay; Modifies Order to Add Only 5% of Bogus Purchases to Income.

The Tribunal condoned a 1,200-day delay in filing the appeal due to non-receipt of the appellate order, partly attributed to the COVID-19 period. The appeal concerned the addition of Rs. 7,27,536/- as bogus purchases. The Tribunal found that only the profit element should be added to income in such cases. It modified the order of the Commissioner, directing the Assessing Officer to sustain the addition to the extent of 5% of the bogus purchases, thereby partly allowing the appeal.

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Issues involved: Appeal against confirmation of addition of Rs. 7,27,536/- on account of bogus purchases.

Issue 1: Condonation of Delay

The appeal was delayed by 1,200 days due to non-receipt of the appellate order. The delay was partly due to the COVID-19 period and the failure of the first appellate authority to supply the copy of the order despite repeated requests. The Tribunal found that the delay was not attributable to the assessee, who only became aware of the order in March 2021. Considering the circumstances, the Tribunal decided to condone the delay and admit the appeal for adjudication.

Issue 2: Addition of Rs. 7,27,536/- on Account of Bogus Purchases

The Assessing Officer (AO) added the entire amount of Rs. 7,27,536/- to the income of the assessee as bogus purchases, based on information received regarding accommodation entries provided by a third party. The AO found that the assessee failed to produce sufficient evidence to prove the legitimacy of the purchases. The Commissioner of Income-tax (Appeals) upheld the AO's decision.

Judgment:

After reviewing the facts, the Tribunal noted that the assessee is engaged in manufacturing electrical goods and aluminum items. It was observed that the purchases were made from entities controlled by a party providing accommodation entries. The assessee provided bills and vouchers but did not respond to the show cause notice. The Tribunal held that in cases of bogus purchases, only the profit element should be added to income. Citing precedents, the Tribunal decided to make a reasonable disallowance of 5% on the profit element of the purchases. Consequently, the Tribunal modified the order of the Commissioner and directed the AO to sustain the addition to the extent of 5% of the bogus purchases.

Conclusion:

The Tribunal partly allowed the appeal filed by the assessee, modifying the addition on account of bogus purchases to 5% of the total amount.

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