PCIT Vs SVD Resins & Plastics Pvt Ltd (Bombay High Court)
Bombay High Court held that half-hearted approach on the part of AO to make additions on the issue of bogus purchase would not be conducive. Bogus purchase addition also cannot be on the basis of superficial inquiry.
Facts- Assessee is to be engaged in the business of trading in resins and chemicals on wholesale basis. On information received from the DGIT (Investigation), Mumbai AO invoked Section 147 of the Income Tax Act, 1961 to reopen the completed assessment by issuing notice u/s. 148. AO was of the opinion that the assessee had made purchases amounting to Rs.1,34,25,500/- from six parties who were declared by the Sales Tax Department as ingenuine dealers. AO was of the opinion that the disputed purchases did not have nexus with the corresponding sales. Accordingly, he made an addition of the said amount u/s. 69C of the Act on the ground of there being unexplained payments qua the disputed purchases.
CIT(A) reduced the same from 12.5% and confirmed the addition to the extent of 7.76%. Tribunal partly allowed the appeal filed by the revenue.
Conclusion- Any half hearted approach on the part of the AO to make additions on the issue of bogus purchases would not be conducive. It also cannot be on the basis of superficial inquiry being conducted in a manner not known to law in its attempt to weed out any evasion of tax on bogus transactions. The bogus transactions are in the nature of a camouflage and/or a dishonest attempt on the part of the assessee to avoid tax, resulting in addition to the assessee’s income. It is for such reason, the approach of the AO is required to be well considered approach and in making such additions, he is expected to adhere to the lawful norms and well settled principles. After such scrutiny, the transactions are found to be bogus as the law would understand, in that event, they are required to be discarded by making an appropriate permissible addition.
