SHRI RAJESHKUMAR C JAIN,MUMBAI vs. NFAC, DELHI

2 &585/Mum/2023 Shri Rajesh Kumar CJain 43,021/- for the AY: 2010-11. In both the years the penalty has been levied on estimation of gross profit rate on the alleged bogus purchases made by the AO.

Facts in brief are that, the assessee is an individual engaged trading in the business of particular ferrous and non ferrous metals. Based on some information received from Sales Tax Department, Maharashtra through DGIT (Inv) Mumbai, that some of the parties from whom assessee had made purchases were found to be providing accommodation bills without actual delivery of goods. In the AY: 2009-10 purchases from such parties (7 parties) aggregated to Rs. 42,75,339/- ; and for the AY: 2010-11 from 4 parties aggregated to Rs. 16,70,720/-. Before the AO, Assessee submitted copies of bill of the purchases, copy of bank statement, copy of vat challans and copy of ledger accounts. However, the Ld. AO simply based on said information held that purchases cannot be accepted to be genuine and accordingly he estimate gross profit rate of 12.5% of the unproved purchases which amounts to Rs. 5,34,417/- in AY: 2009-10 & Rs. 2,08,840/- in AY:2010-1011.

After hearing, Ld. DR and on perusal of impugned order, we find that before the authorities below to prove the genuine of the purchases, Assessee had submitted following documents and explanation.

These submissions and explanation as well as the evidences filed have neither been rebutted nor has been found to be non genuine except that the entire addition is based on adhoc estimate of GP rate on alleged bogus purchases, that to be on the basis of some information received from Maharashtra sales tax department, without any independent enquiry by the AO. Once the source of the 5 &585/Mum/2023 Shri Rajesh Kumar CJain purchases are from the books, payments have been made through banking channels along with the copy of delivery challans and here in particular case, assessee also produced stock register and also quantities the details of purchases, corresponding sales, therefore it cannot be held that the purchases were non genuine or any kind of penalty for furnishing of inaccurate particular sales can be levied on estimated GP rate of 12.5%.

Nothing has been proved beyond doubt as alleged by the Ld. CIT(A), that assessee was indulged in availing accommodation entry of bogus purchases. The addition has been made on some estimate of profit element embedded in such purchases and therefore, on such adhoc estimate of GP rate, penalty u/s. 271(1)(c) is not warranted, especially when assessee has produced all the details and documentary evidences of purchases and corresponding sales and there is no tinkering with the trading result and overall gross profit have been accepted, Accordingly, the penalty levied by the AO and sustain by the CIT(A) is deleted for both the year.

Accordingly, the ground raised by the Assesses is allowed. In the result appeals of the assessee are allowed.