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Addition on Account of Bogus Purchases and Unexplained Payments - AO disallowed the purchase made to some parties as bogus purchases and also made the addition for payment made to those parties as unexplained payment - CIT(A) disallowed 30% of the total addition
HELD THAT:- First we shall consider the addition made by the AO as unexplained payment, we find that the AO in this case has made a thorough investigation. Perusal of which clearly shows that the entire payment made by the assessee was by cheque and was debited in the assessee’s bank account, therefore, the same cannot be said to be unexplained payment. Therefore, in our opinion, there was no justification for making the addition as unexplained payment.
As far as the bogus purchase is concerned, we find that the AO recorded the detailed finding so as to establish that the purchases claimed to have been made was bogus. On these facts, the decision in the case of ASSISTANT COMMISSIONER OF INCOME TAX, CIR. 5 BARODA. VERSUS M/S. KULUBI STEEL [2010 (12) TMI 1201 - ITAT AHMEDABAD]would be squarely applicable, wherein it was held that, Any person obtaining bogus bills of some other parties, would do so for getting some benefit. But what would be the magnitude of the benefit would depend upon facts of each case. After considering the facts we are of the opinion that it would meet ends of justice, if the disallowance is sustained at 12.5% of the purchase from these two parties."
Since the facts of the assessee’s case are identical, we respectfully following the above decision of the ITAT, direct the AO to disallow 12.5% of the purchases made during the year under consideration.
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