In this case before
The Income Tax Appellate Tribunal (ITAT) Mumbai, the Assessing Officer (AO) made an addition to Synergy Creations’ income on account of alleged bogus purchases,
the Assessing Officer (AO) made an addition to Synergy Creations’ income on account of alleged bogus purchases, claiming that the entity had taken accommodation bills from certain parties to inflate its expenses. However, the AO did not reject the books of accounts nor clarify the specific section of the Income Tax Act under which the addition was made. Similarly, the First Appellate Authority also did not find the books of accounts unreliable.
In this case, the ITAT Mumbai held a Partial Addition for Bogus Purchases by directing the AO to restrict the addition to 12.5% of the alleged bogus purchases. This approach allows for a fair assessment by estimating income reasonably when purchases appear inflated, as seen in similar cases like M/s. Kuldeep Glass and Aluminium v. ITO.
The ITAT held that while the bills might be deemed bogus, the purchases were genuine and the corresponding sales had been accepted. Therefore, to achieve a fair resolution, the ITAT directed the AO to restrict the addition to 12.5% of the alleged bogus purchases. This approach aligns with the principle of estimating income where purchases are suspected to be inflated, as observed in similar cases, such as M/s. Kuldeep Glass and Aluminium v. ITO (ITA No. 7139/Mum/2018).