Sumer Chand Jain Vs ITO (ITAT Delhi)
ITAT Delhi held that addition in case of bogus purchases is restricted to the extent of 25% of the purchases. As lower authorities made addition of 25% of bogus purchase, the same is sustainable.
Facts- The assessee individual is engaged in the business of trading in export handicraft goods and jewellery. For AY 2010-11, the assessee filed his return on 28.09.2010 declaring income of Rs. 6,31,180/-. It was processed under section 143(1) of the Income Tax Act, 1961 (the “Act”). Subsequently, the assessment was reopened by issue of notice under section 148 of the Act on 30.03.2017 after approval from Pr. CIT.
AO disallowed 25% of alleged bogus purchase amount on account of inflation of purchase price which he added to the income of the assessee.
Conclusion- Held that the finding of the Ld. AO/CIT(A) is that the assessee did purchase goods without bills from some other suppliers otherwise sales could not be effected and that he has been benefitted by providing margin of grey market. It was in this backdrop that the Ld. AO/CIT(A) instead of treating the entire impugned purchases as bogus and adding the same to the income of the assessee restricted the addition to 25% of such purchases following the decision in Vijay Protein Ltd.(supra) and Sanjay Oil Cake Industries (supra). The above findings remain uncontroverted before us. We find no infirmity in the order of the Ld. CIT(A) and sustain the same. In the result, appeal of the assessee is dismissed.
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeal filed by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-17, New Delhi (“CIT(A)”) dated 21.10.2019 pertaining to the Assessment Year (“AY”) 2010-11.
2. The grounds raised by the assessee are as under:-
“1. That on facts and in circumstances of the case and in law, Ld. CIT (A) has erred in confirming the order passed u/s. 143(3)/147 by the Ld.
2. That the Ld. CIT(A) has erred on facts and in law in upholding the reopening of the assessment on the basis of notice u/s.148 of the Income Tax Act 1961 which itself is not valid.
3. That the Ld. CIT(A) has erred on facts and in law in upholding the assumption of Ld. AO that the purchase made by the assessee amounting to Rs.3,42,09,724/- is bogus.
4. That the Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.85,52,431/- considering that assessee has earned profit at 25% on the assumed bogus purchase of Rs.3,42,09,724/-
5. That the impugned assessment order is arbitrary, illegal, bad in law and the violation of rudimentary principle of contemporary jurisprudence.
3. Brief facts of the case are that the assessee individual is engaged in the business of trading in export handicraft goods and jewellery. For AY 2010-11, the assessee filed his return on 28.09.2010 declaring income of Rs. 6,31,180/-. It was processed under section 143(1) of the Income Tax Act, 1961 (the “Act”). Subsequently, the assessment was reopened by issue of notice under section 148 of the Act on 30.03.2017 after approval from Pr. CIT, Delhi-17, New Delhi on receipt of following information by the Ld. Assessing Officer (“AO”) from DCIT, Central Circle-4, Surat:
“2. As per information received from DCIT, Central Circle-4, Surat vide letter No. SRT/DCIT/CC-4/Rajendra jain, Dharmichand jain, Sanjay Choudhary Gr./2015-16 dated 30.11.2015, Shri Rajendra Jain, Shri Sanjay Choudhary and Shri Dharmichand Jain were some of the entry providers operating in. Mumbai, indulging in providing accommodation entries in the nature of bogus sales and unsecured loans. A search and seizure action in these groups of cases were carried out in 03.10.2013 by the DGIT(Inv.), Mumbai Charge. During the course of search operation, list of the beneficiaries were prepared who were benefited from the accommodation entries obtained from the groups through bogus billing against which no goods were supplied to these beneficiaries. The list of beneficiaries was provided by the office of the DCIT, Central Circle-4, Surat alongwith the office letter date 30/11/2015. On perusal of beneficiaries list, it has perused that assessee has taken the accommodation entry of total value of transaction of Rs. 3,42,09,724/- from M/s five entities as per the following details:-
