The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the addition made by Commissioner of Income Tax (Appeals)[CIT(A)] on a 5% estimated basis on bogus purchase.
The assessee Silmohan Gems Private Limited is engaged in the business of trading and manufacturing of diamonds. After filing the return of income under regular provisions and book profit under Section 115JB of Income Tax Act.
Subsequently, on an information from the investigation wing of income tax department, the Assessing Officer (AO) found that the assessee has obtained accommodation entry of bogus purchases from some entities.
For these reasons AO initiated reassessment proceedings under Section 147 of the Income Tax Act thereafter passed assessment order along with estimating 3% of the invoice amount of said purchase made from M/s Millennium Stars.
The Commissioner of Income Tax reviewed the assessment records and, after examining the documents and submissions provided by the taxpayer, issued an order under Section 263 of the Income Tax Act. The Commissioner determined that the assessment conducted by the Assessing Officer (AO) was flawed and detrimental to the revenue, and directed the AO to address the matter concerning the alleged fraudulent purchases.
Thereafter the AO made an addition on the entire amount of bogus purchases.
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)[CIT(A)] who restricted the disallowance of bogus purchases at 5% of the purchase value.
Against the CIT(A) order assessee filed appeal before the tribunal.
Before the bench Mitali Mehta, the counsel for the assessee argued that the assessee genuinely purchased the goods from the M/s Millennium Stars. and which entered into the stock register.
Kishor Dhule, department representative contented that the assessee failed to produce said party before the Assessing Officer for verification of the purchase from said party. Thus, the disallowance at 100% of purchase amount should have been made by CIT(A) as against disallowance restricted at the rate of 5% of the purchase amount.
Upon reviewing the details, the tribunal highlighted that it is primarily the responsibility of the taxpayer to provide evidence supporting the purchases made from the mentioned party. However, the taxpayer failed to present the party in question and provide substantiation for the purchases, despite the goods being recorded in the stock register. Additionally, it was noted that the goods were actually acquired from a different source, while accommodation bills were obtained solely from M/s Millennium Stars.
Accordingly, the bench justified the addition was made by CIT(A) on a 5% estimated basis on bogus purchase.
Hence, the bench consisting of two members, Om Prakash Kant (Accountant Member) Kavitha Rajagopal (Judicial Member) reviewed the arguments presented by both parties dismissed the appeal of the assessee.
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