DCIT Vs Parth Developers (ITAT Ahmedabad)
ITAT Ahmedabad held that addition in case of bogus purchases are restricted only to the extent of profit element involved on such purchases. Accordingly, CIT(A) correctly restricted addition to the extent of 10%.
Facts- AO held that the claim of expenditure of Rs.4,17,13,702/- on account of creditors as bogus expenditure and added the same as the assessee’s total income and demanded tax thereon.
Aggrieved against the Assessment Order, the assessee filed an appeal before CIT(A). CIT(A) restricted the disallowance by estimating at 10% on account of alleged bogus purchase and directed to confirm the addition of Rs. 41,71,370/- and to delete balance addition of Rs. 3,75,42,332/- on account of bogus purchase and thereby partly allowed the assessee appeal. Being aggrieved, revenue has preferred the present appeal.
Conclusion- The Hon’ble Gujarat High Court in the case of CIT-II vs Gujarat Ambuja Exports Ltd [2014] 43 taxmann.com 244 (Guj), wherein, the addition of 5% of the bogus purchase confirmed by the Tribunal was upheld.
Respectfully following the above judicial pronouncements, we have no hesitation in confirming the addition to the extent of 10% on account of alleged bogus purchase. Thus the grounds raised by the Revenue is devoid of merit and the same is hereby dismissed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Revenue as against the appellate order dated 10.06.2019 passed by the Commissioner of Income Tax(Appeals)-10, Ahmedabad, arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2016-17. The Cross Objection is filed by the Assessee as against the above Revenue appeal.
2. The brief facts of the case is that the assessee is a partnership firm engaged in the business of civil construction, filed its Return of Income declaring total income of Rs.82,28,850/- for the Assessment Year 2016-17. The return was processed u/s. 143(1) and then taken for limited scrutiny. The assessee was asked to furnish name, PAN, current communication address and address as per invoices of some of the suppliers from which purchases were allegedly made for the year under consideration. The assessee was also asked to provide party-wise ledger of the suppliers in which large amount remained due to be paid at the end of the year. Further the A.O. noticed that the assessee has shown large purchases from the parties without any regular payments during the year on physical verification by the Inspector such parties were not available in those addresses and after issuance of summons to the various parties, the bogus purchases made by the assessee were determined by the Assessing officer as follows:
