The Income Tax Appellate Tribunal (ITAT), Chennai Bench ruled that once Addition towards alleged bogus purchases made, additions of similar amounts can not be made as it leads to Double Addition.
The assessee, Sasikala Raghupathy founder of M/s. BGR Energy Systems Ltd. He died in July, 2013. The assessee has filed his return of income for the assessment years 2011-12, 2012-13 and 2013-14 declaring total income of Rs.1,03,62,07,245/, Rs.60,31,87,417/- and Rs.35,88,29,310/-. A search was conducted, in the case of M/s. BGR Energy Systems Ltd. The assessee being Director of M/s. BGR Energy Systems Ltd., the residential premises of the assessee was also covered. During the course of search, it was noticed that M/s. BGR Energy Systems Ltd., was indulged in obtaining bogus purchase bills from various bill traders. The assessment in the case of M/s. BGRESL was completed, and made additions to bogus purchases made from five alleged bill traders.
The AO has made additions towards similar amounts in the hands of the assessee on the ground that the assessee was the ultimate beneficiary of money siphoned out from the company. The assessee carried the matter in appeal before the CIT(A) and contended that when additions were made for total purchases in the hands of M/s. BGR Energy Systems Ltd., similar additions cannot be made in his name because it amounts to double addition.
The CIT(A) for the reasons recorded in his appellate order has deleted additions made in the hands of the assessee by holding that when additions were made in the hands of M/s. BGR Energy Systems Ltd., additions made in the hands of assessee become infructuous and hence deleted additions made by the AO towards alleged bogus purchase for all three assessment years.
The revenue submitted that the CIT(A) has erred in deleting addition towards alleged bogus purchases made in the hands of the assessee by holding that when additions were made for similar amounts in the name of another assessee, no additions can be made in the hands of the assessee because it tantamount to double addition without appreciating the fact that the assessee was the ultimate beneficiary of amount siphoned out from the company by booking bogus purchases.
The assessee on the other hand strongly supported the order of the CIT(A) submitted that once addition was made in the name of another assessee, no addition can be made in the name of the assessee for a similar amount because it amounts to double addition.
The coram of Judicial Member, Duvvuru RL Reddy and Accountant Member G. Manjunatha found that the AO has made additions towards alleged bogus purchases made from five parties in the hands of M/s. BGR Energy Systems Ltd. The AO has once again made a similar addition in the hands of the assessee without assigning any reasons.
The ITAT held that once addition was made towards alleged bogus purchases in the hands of M/s. BGR Energy Systems Ltd., no additions can be made to similar amounts in the hands of the assessee because it amounts to double addition. The CIT(A) after considering relevant facts has rightly deleted additions made by the AO and hence, the Tribunal upheld findings of the CIT(A) and rejected grounds taken by the Revenue for all Assessment years.
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