NAVEEN AGGARWAL,DELHI vs. ITO WARD 44(6), DELHI
What did the Tribunal hold?
The Tribunal held that the addition of the entire purchase amount as unverifiable was not appropriate. Following the Supreme Court's ruling, it was decided that only the profit element embedded in such purchases should be taxed.
What were the facts?
The assessee's case was re-opened under Section 148 based on information about dummy concerns from which purchases were made. The AO added the entire purchase amount as unexplained income as the assessee failed to substantiate them. The CIT(A) dismissed the appeal for non-prosecution.
What were the issues?
Whether the addition of entire unverifiable purchases is justified, or only the profit element should be taxed as per Supreme Court's decision.
Which sections of the Income-tax Act were involved?
Section 147,Section 148,Section 250,Section 69A,Section 145(2),Section 144,Section 144B
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- NK Proteins Ltd. v. DCIT115 citing292 CTR 354 · 2017 · SC
Income Tax Appellate Tribunal, DELHI “C” BENCH: NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI MANISH AGARWAL
Year : 2019-20] Naveen Aggarwal, vs ITO, A-2/103, Paschim Vihar, Ward-44(6), Delhi-110063. Delhi. PAN-AFOPA3203J APPELLANT RESPONDENT Appellant by Shri Gurjeet Singh, CA Respondent by Shri Om Prakash, Sr.DR Date of Hearing 13.05.2025 Date of Pronouncement 13.05.2025 ORDER
PER MANISH AGARWAL, AM :
The present appeal has been filed by the assessee seeking to assail the First Appellate order dated 09.12.2024 of Ld. Commissioner of Income Tax (A), National Faceless Appeal entre (“NFAC”), Delhi [“Ld.CIT(A)”] in Appeal No.NFAC/2018-19/10335700 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 26.03.2024 passed u/s 147 r.w.s 144 r.w.s.144B of the Act pertaining to assessment year 2019-20.
Brief facts of the case are that the case of the assessee was re-opened by issuing notice under section 148 based on the information available INSIGHT portal of the assessee that the assessee is making purchases from the parties which are dummy concerns. During the course of assessment proceedings, the opportunity was provided to the assessee to explain the purchases made from M/s. Modern Traders/M/s. Modern Enterprises totaling to INR 46,98,167/- as the notices issued u/s 133(6) were uncomplied with. Since the assessee has failed to substantiate the purchases made and requested for cross-examination of the witnesses whose statements were relied upon by the AO, the AO has made the addition of INR 46,98,167/- as unexplained income u/s 69A of the Act in the hands of the assessee. In first appeal, the Ld.CIT(A) has dismissed Page | 1 the appeal of the assessee for non-prosecution. Thus, the assessee is in appeal before the Tribunal by taking following grounds of appeal:- 1. “Because the action for initiation, continuation and conclusion of assessment proceedings u/s 147 r.w.s 144 at an assessed income of Rs 50,47,516 is being challenged on facts and law.
2. Because the action of CIT(A)-NFAC is being challenged on facts and law for not providing reasonable opportunity of being heard. The assessment order being passed is in violation of the principle of natural justice and without giving adequate time and opportunity to the appellant to present the case.
3. Because the action is being challenged on facts and law for making addition of Rs. 46,98,167 treating genuine purchases as bogus purchases u/s 69A whereas per assessee documents in support of genuine purchases has been duly submitted and additionally in the alternative the quantum thereof too is being disputed.
4. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 46,98,167 without rejecting the books of accounts u/s 145(2) hence unsustainable addition and additionally in the alternative the quantum thereof too is being disputed.
5. For any consequential relief and/or legal claim arising out of this appeal and for any addition, deletion, amendment and modification in the grounds of appeal before the disposal of the same in the interest of substantial justice to the assessee.”
3. From the perusal of orders of the lower authorities, we find that in the present case, the additions were made by holding the purchases of INR 46,98,167/- as unverifiable and in-genuine purchases. The sales made against the purchases alleged as bogus has neither been doubted by the AO nor the sales declared by the assessee is disturbed and for the reason that certain purchases could not be established addition towards such purchases was made. Under these circumstances, it could not be fair and appropriate to Page | 2 make the addition for the entire unverifiable purchases. The Hon’ble Supreme Court in the case of N.K. Proteins vs DCIT reported in 292 CTR 354 (SC) has held that in case of unverifiable purchases, the profit element embedded should be taxed and not the entire amount of purchases. It is also seen that if the entire purchases alleged as in-genuine is added to the total income of the assessee, it would give an absurd result.
Under these circumstances, we are of the view that as against the total purchases alleged as in-genuine, the profit embedded should be added to the total income of the assessee.
Looking to the facts of the instant case, in our view, addition to the extent of 10% of profit on the purchases alleged as bogus would be fair and reasonable looking to the nature of the business of the assessee who is a trader in the steel items. Therefore, the AO is directed to make the addition of 10% of unverifiable purchases of INR 46,98,167/-. Accordingly, the grounds of appeal
raised by the assessee are partly allowed.
6. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 13.05.2025.
More judgments on Section 147
- ACIT Central Bilaspur, Bilaspur vs Arun Kumar Agrawal, SaktiITSSA 26/RPR/2025[2018-19]Status: Disposed21 Oct 2026AY 2018-19
- Vinod Agrawal, Kawardha vs Assisstant Commissioner of Income Tax…ITA 666/RPR/2026[2019-20]Status: Heard21 Oct 2026AY 2019-20
- Sar Business Tradelink Private Limited… vs Income Tax Officer, Ward - 1(2), RaipurITA 599/RPR/2026[2014-15]Status: Heard21 Oct 2026AY 2014-15
- Tarunaben Maganlal Bhut, Navagam vs ITO Ward 2(2)(1), RajkotITA 673/RJT/2026[2024-25]Status: Disposed21 Oct 2026AY 2024-25
- Neo Incorporation, Rajkot vs DCIT Circle- 1(2), RajkotITA 471/RJT/2026[2012-2013]Status: Disposed21 Oct 2026AY 2012-2013
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