2025 (3) TMI 412 - HC - Income Tax

Bogus purchases upheld: 25% addition confirmed where supplies lacked adequate documentation despite proper records for other transactions

Refrigerated Distributors Pvt Ltd. Now Known As Partytime Ice Pvt Ltd. Versus The Dy. Commissioner of Income Tax 2 (3) (1), The Assistant Commissioner of Income Tax.

The Bombay HC upheld concurrent findings of three authorities regarding bogus purchases by the assessee. The AO had accepted some supplies backed by ... Estimation of income - Bogus purchases - addition to the extent of 10% of the Gross Profit margin in respect of unproved purchases by ITAT - 25% addition was confirmed by CIT(A) - HELD THAT:- In this case, AO has accepted the Appellant’s version regarding some of the supplies, which were backed by documentation like delivery challans. If delivery challans and other valid documentation were possible regarding some of the supplies, we fail to understand why the same was not possible regarding the supplies, which are now adjudged as bogus. The explanation for the meagre documentation inspired no confidence and bordered on frivolity. AO has also considered the stereotyped affidavits of the so-called suppliers and correctly rejected them. If the Appellant was indeed involved in making bogus purchases. This question, it appears, was posed even to the assessing officer who has dealt with the same in the assessment order. It is not for this Court to fathom the modus operandi to be adopted by the Appellant while indulging in bogus purchases. Possibly because this modus operandi may have worked in the past, the Appellant must have assumed that the same would work in the future. Based upon such questions posed to the Court, no case is made out to disturb the concurrent findings of fact recorded by the three authorities. No substantial question in these Appeals. The Appeals before the Bombay High Court related to assessment years 2007-08 to 2012-13. The main issue raised was whether the Income Tax Appellate Tribunal (ITAT) erred in confirming the addition of 10% of the Gross Profit margin for unproved purchases in the assessment year 2009-10. The Appellant argued that the rejection of the books of account was improper and contended that the purchases were not bogus. The assessing officer had initially added 25% of the bogus purchases, which was later reduced to 10% by the ITAT.The Court noted that the challenges were essentially to the concurrent findings of facts recorded by three authorities, and since these findings did not exhibit any perversity, they did not give rise to substantial questions of law. The assessing officer had concluded that the purchases were bogus after a detailed analysis, and the Commissioner of Income Tax (Appeals) and the ITAT upheld this finding, albeit reducing the addition to 10%.The Appellant's argument centered around the lack of purchase invoices and delivery challans as reasons for doubting the purchases. However, the Court found that the Appellant failed to produce credible material supporting the purchases, including Octroi Check Naka records. The Appellant's explanations were deemed unconvincing, and the Court observed that the assessing officer could have imposed a 100% addition instead of 25% or 10%.The Court emphasized that the Appellant needed to establish perversity in the findings, which was not done in this case. The Appellant's reliance on certain case laws was deemed inapplicable as the assessing officer had considered various factors beyond the absence of suppliers or delivery challans. The Court also questioned why proper documentation was available for some supplies but not for those deemed bogus.The Appellant's argument about dealing with the same suppliers even if involved in bogus purchases was dismissed by the Court, stating that it was not their role to speculate on the Appellant's modus operandi. Ultimately, the Court found no substantial question of law in the Appeals and dismissed them without costs.In conclusion, the Court upheld the concurrent findings of the assessing officer, Commissioner of Income Tax (Appeals), and the ITAT regarding the bogus purchases and the addition of 10% to the Gross Profit margin. The Appellant's arguments were found to lack merit, and the Appeals were dismissed.