What did the Tribunal hold?

For AY 2011-12, the tribunal restricted the addition to 8% of the disputed purchases, considering it as suppressed profit. For AY 2012-13, the addition was deleted due to lack of evidence.

The assessee's purchases were added by the Assessing Officer due to doubts about their genuineness. For AY 2011-12, the addition was Rs. 18,41,576, and for AY 2012-13, it was Rs. 1,68,827.

What were the issues?

Whether additions on account of alleged bogus purchases are justified when sales are not doubted, and what is the appropriate relief in such cases.

Advance Engineering Corporation vs ITO | ITAT Kolkata 2023

Income Tax Appellate Tribunal, “SMC” BENCH, KOLKATA

Before: SHRI SANJAY GARG, HON’BLE & DR. MANISH BORAD, HON’BLE

For Appellant: Shri Somnath Ghosh, Advocate

Hearing: 01/12/2023Pronounced: 12/12/2023

Heard together (2 matters)

I.T.A. No. 257/Kol/2023

I.T.A. No. 258/Kol/2023

Read from the judgment's own cause title. This page is filed under one of them.

Per Sanjay Garg, Judicial Member :

Both these appeals are directed at the instance of the assessee against the order of the National Faceless Appeal Centre (hereinafter the “ld. CIT(A)”) even dt. 27/01/2023, passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Year 2011-12 and 2012-13. 2. First we take up the appeal for Assessment Year 2011-12. The sole issue involved in this appeal is relating to the addition made by the Assessing Officer on account of unexplained purchases. The Assessing Officer observed that the assessee had failed to establish the & Advance Engineering Corporation genuineness of some of the purchases, therefore, he made the addition of the said bogus purchases of Rs.18,41,576/-. Before us, the ld. Counsel for the assessee has submitted that the assessee is a trader and that the sales of the assessee have not been doubted by the Assessing Officer and the assessee has returned the gross profit on such sales @ 6.06%. The ld. Counsel for the assessee has relied upon various case- laws to submit that when the sales have been admitted, the entire purchases cannot be added. He has submitted that at the most, it can be presumed that the assessee had made the purchases from the grey market at some lower rate than shown in the books of accounts.

After hearing the ld. D/R, we are of the view that there is merit in the contention of the ld. Counsel for the assessee. In this case, admittedly, the assessee is a trader. The sales have not been doubted. Even the source of purchases has also not been doubted. The only dispute is that the genuineness of the actual purchases made has been doubted by the Assessing Officer. Considering the aforesaid facts, a reasonable conclusion will be that the assessee might have suppressed some profit element by showing the purchases at a higher rate. The ld. Counsel for the assessee has submitted that the assessee has returned gross profit for the subsequent year 2012-13 @ 5.09%, which was lesser than the profit shown for the year. However, considering that the assessee has failed to establish the genuineness of the actual purchases made and there is an element of undisclosed profit, in our view, the & Advance Engineering Corporation interest of justice will be well served if the assessee’s gross profit in respect of the alleged bogus purchases of Rs.18,41,576/- is considered @ 8% on the said amount. Addition is restricted to that extent. Accordingly, appeal of the assessee for Assessment Year 2011-12 is partly allowed.

Now, we take up the assessee’s appeal in ITA No. 258/Kol/2023 for Assessment Year 2012-13. 5. In this appeal, the sole issue is relating to the alleged bogus purchase from one party of Rs. 1,68,827/-. The Assessing Officer whilst making this addition has failed to bring on record any evidence from which it can be established that the assessee has made any unaccounted purchase from any party. Thus, in our view, the impugned addition made by the Assessing Officer on account of bogus purchases, is hereby ordered to be deleted. Accordingly, appeal of the assessee for Assessment Year 2012-13 is allowed.

In the result, appeal of the assessee for Assessment Year 2011-12 is partly allowed and for Assessment Year 2012-13 is allowed. Order pronounced in the Court on 12th December, 2023 at Kolkata. (DR. MANISH BORAD) JUDICIAL MEMBER Kolkata, Dated 12/12/2023 *SC SrPs & Advance Engineering Corporation

आदेश क" "ितिलिप अ"ेिषत/Copy of the Order forwarded to : 1. अपीलाथ" / The Assessee

""यथ" / The Respondent 3. संबंिधत आयकर आयु" / Concerned Pr. CIT 4. आयकर आयु" अपील / The CIT(A)- ( ) 5. िवभागीय "ितिनिध ,आयकर अपीलीय अिधकरण, कोलकाता/DR,ITAT, Kolkata, 6. गाड" फाई/ Guard file.

आदेशानुसार/ BY ORDER,

ADVANCE ENGINEERING CORPORATION,KOLKATA vs. ITO,WARD-34(2), KOLKATA

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