ITO Vs Bhagavanji Bhai Damjibhai Bhimani (ITAT Rajkot)
The Income Tax Appellate Tribunal (ITAT), Rajkot dismissed the Revenue’s appeal against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] relating to Assessment Year 2019-20 concerning additions made on account of alleged bogus purchases. The assessee had filed a return declaring total income of Rs. 9,98,510/-. The case was reopened under Section 147 of the Income Tax Act based on information received through the Insight Portal under the Risk Management Strategy (RMS), indicating that the assessee had allegedly obtained bogus purchase bills amounting to Rs. 13,84,955/- from entities associated with the Chaniyara Group, which was alleged to be engaged in providing accommodation entries.
During assessment proceedings, the Assessing Officer treated the purchases of Rs. 13,84,955/- as bogus under Section 69C and added the entire amount to the assessee’s income. An additional sum of Rs. 13,849/- was added towards alleged commission expenditure for obtaining accommodation entries. The assessed income was determined at Rs. 23,97,314/-. The Assessing Officer also applied Section 115BBE to the addition.
The assessee challenged the assessment before the CIT(A). After considering the submissions and case laws, the CIT(A) observed that although the parties from whom purchases were shown were found to be bogus, the Assessing Officer had not doubted the consumption or sales recorded by the assessee. The CIT(A) held that the purpose behind obtaining such bills appeared to be inflation of purchase price to suppress profits. Accordingly, instead of sustaining the entire addition, the CIT(A) estimated the suppressed profit element embedded in the purchases at 13.7%, being the gross profit ratio shown by the assessee, and restricted the addition to Rs. 1,89,739/-. However, the addition of Rs. 13,849/- towards commission expenses was confirmed.
