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2021 (9) TMI 765 - AT - Income TaxEstimation of income - Bogus purchases - assessee has failed to prove the genuineness of the purchases and consumption/utilization of the materials purchased - CIT(A) enhanced the addition to100% of the bogus purchases as against 12.5% applied by the AO - HELD THAT:- We note that in case of bogus purchases the entire purchases can not be brought to tax as has been held in a series of decisions of the co-ordinate Bench wherein it has been held that only profit element can be brought to tax despite the purchases being bogus. After taking into account the facts of the assessee’s case, we are of the considered opinion that CIT(A) has wrongly enhanced the addition to 100% and the same can not be sustained. Accordingly, we are setting aside the order of Ld. CIT(A) on this issue by restoring the assessment order. Addition invoking the provisions of section 40A(3) - assessee has made various cash payments exceeding ₹ 20,000/- to various parties -Need to develop identity of the agent as well as suppliers - HELD THAT:- Assessee is engaged in the business of water proofing and labour job work. It was submitted before us that sand is purchased by the assessee from agent who arranged the loaded truck of sand at the site of the assessee on the condition that payment would be accepted in cash only. These transporters are not having any fixed place of business but bring sand filled lorries and come to the site through some reference. These truck drivers are not having any PAN numbers and therefore we find merit in the contention of the assessee that keeping in view of the nature of business of the assessee and nature of material purchase, it is impracticable to make payment otherwise than in cash. We are therefore not in agreement with the conclusion drawn by the Ld. CIT(A) that the identity of the agent as well as suppliers were required to be established in order to claim the expenditure where the payments are made in cash. Only in three cases the payment has exceeded ₹ 20,000/- and in all other cases the payments were below ₹ 20,000/-.Even in three cases the reasonable cause has been explained by the assessee before us that payment had to be made out of business emergencies and practical difficulties. - Decided in favour of assessee.
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