ITAT Confirms Addition on Account of Purchases made from Grey Market since Assessee Failed to Produce Evidence on Transportation of Goods [Read Order]

Mumbai bench of ITAT confirmed the addition on account of purchases made from Grey Market since Assessee failed to establish with necessary evidence regarding transportation of goods.

On investigation, DGIT found that assessee had made bogus purchase from suspicious parties subsequently assessee was required to reply to the notice issued under Section 142(1) of the Income Tax Act by producing relevant documentary evidences and also to produce purchase parties to prove the genuineness of the transaction.

However, the AO noted that till date, the assessee has neither submitted the confirmation of said purchases from respective purchase parties nor produced the broker/agents or the suppliers before the undersigned. Hence, AO proceeded to make a disallowance of 12.5% of the purchase.

CIT (A) confirmed the action of AO in making addition of 12.5% of the bogus purchase. Further aggrieved assessee appealed the matter before the tribunal bench.

Accountant Member Shamim Yahya, heard both the parties’ contention and perused the records and noted that AO has made the necessary enquiry and issue of notice to all the parties have returned unserved. It was observed that AO has not been able to provide any confirmation from any of the party and all this proves that assessee has obtained bogus purchase bills and there is no cogent evidence of transportation of goods.

The tribunal also stated that revenue authorities cannot accept the purchase as genuine one since all those bills are from non-existent /bogus parties. The bench also pressed the decision of Gujarat High Court in the case of Apex Appeal No. 240 of 2003 in the case of N K Industries vs Dy CIT wherein hundred percent of the bogus purchases was held to be added in the hands of the assessee.

Finally the tribunal also added that since the appeal filed was not by revenue it will not be appropriate to take away the relief already granted by the revenue to the assessee and subsequently confirmed the order of CIT (A).

To Read the full text of the Order CLICK HERE