The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the telescoping benefit allowable on addition on the bogus purchases not on cash generated out of such bogus purchases by group concerns.
Facts of the case, in brief, are that the assessee is an individual and derived income from salary, income from house property, income from business or profession and income from other sources. For the relevant year, the A.O. considered certain purchases as bogus and added the same to the total income of the assessee.
The issue before the Tribunal was to giving telescopic benefit of the addition on account of commission expenses.
Assessee argued that if certain addition on account of bogus purchases is made, then, the commission expenses can be met out such addition on account of bogus purchases. The assessee further relied on the decision of the Delhi High Court in the case of CIT vs., Sonal Constructions wherein the Court has accepted the theory of benefit of telescoping. It was contended that in case there is an addition on account of bogus purchases, such additional income should be available to the assessee to meet the expenses towards commission.
The Tribunal bench comprising Judicial Member Ms. Suchitra Kamble and Accountant Member Mr. R K Panda observed that the present addition would be revived to the extent of the amount by which the addition on account of bogus purchases could be less than the amount of this expenditure of Rs.6,41,725/.
“It is the submission of the Learned Counsel for the Assessee that benefit of telescoping should be available to the assessee on account of addition, if any, in the case of other group concerns as a whole. The plea of the assessee, in our opinion, is not acceptable. The assessee can get the telescoping benefit for addition on account of bogus purchases in his case only and cannot get the telescoping benefit on account of the cash generated out of such bogus purchases in other group concerns for meeting the expenditure towards acquisition of gold coins amounting to Rs.6,41,725/- for this year. The ground raised by the assessee is accordingly partly allowed for statistical purposes,” the Tribunal said.
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