Vinod Gupta Vs ITO (ITAT Jaipur)
Conclusion: Addition of unexplained credits was restricted to Rs. 12,50,000/- and estimated the profit element on inflated purchases obtained through bogus accommodation entries, while deleting the bulk of the Rs. 4,05,71,650/- addition made by AO.
Held: Assessee was engaged in agro-based trading, faced reassessment for Assessment Year (AY) 2017-18 based on information from a survey under Section 133A conducted at premises linked to Shri Ashok Kumar Gupta and associates. The survey revealed accommodation entries for non-genuine purchases and sales provided to various parties, including assessee, through entities like Umesh Kumar Vivek Kumar, SA Agro International, and Mahaveer Prasad Suresh Kumar, controlled by Ashok Kumar Gupta. AO added Rs. 4,05,71,650/- as unexplained credits under Section 68 by treating the purchases as bogus, based on statements recorded during the survey and digital evidence. Assessee failed to reply to Section 143(2) and a show-cause under Section 144, leading to an ex-parte best judgment assessment. Aggrieved by AO’s order, assessee appealed to CIT(A), who set aside the assessment under Section 251(1)(a) and directed fresh adjudication by AO, citing the ex-parte nature and need for further verification. Aggrieved by the CIT(A)’s order, assessee appealed to ITAT. Assessee argued that purchases were genuine, supported by bills, book entries, cheque payments, and quantitative details, with no inflation in prices or suppression of production found. Assessee contended that Section 68 did not apply to credit purchases, and sales already reflected in books could not be added again, as it would amount to double taxation. Assessee cited precedents like CIT vs. Vijay Proteins Ltd. and Madhu Solanki vs. ITO, where additions on bogus purchases were restricted to the profit element. It was held that while the purchases were bogus, inflating expenses via fictitious invoices, only the embedded profit element warranted addition, not the entire amount, to avoid double taxation on sales. Therefore, the bench estimated the profit at Rs. 12,50,000/-, aligning with similar cases restricting additions to 12.5% for bogus purchases relying on Gujarat High Court decisions like Kashhiram Textile Mills and others.
