DCIT-19(1), MUMBAI, MUMBAI vs. B.M. ENTERPRISES, MUMBAI

PER RATNA DASGPUTA, AM

The present appeal by the Revenue arises from order dated 25/02/2026 passed by the National Faceless Appeals Centre – hereinafter referred to as Ld. CIT(A) – u/s 250 of the Income-tax Act, 1961 – hereinafter referred to as “the Act”.

B.M. Enterprises 2 ITA No. 5025/MUM/2026

i. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in restricting the addition to 5% of the alleged bogus purchases as against 12.5% estimated by the Assessing Officer, without properly appreciating the facts on record." ii. Whether on the facts and in the circumstances of the case and in law, the Ld. CITIA) failed to appreciate that the assessee had failed to establish the genuineness of purchases, as the parties were identified as accommodation entry providers by the Sales Tax Department." iii. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in granting relief on purely ad-hoc basis without bringing any cogent material on record to justify reduction of addition." iv. Whether on the facts and in the circumstances of the case and in law, the Lat. CIT(A) failed to appreciate that the AO had already taken a reasonable view by estimating profit @ 12.5%, which is supported by judicial precedents in similar cases of bogus purchases." v. "Whether on the facts and in the circumstances of the case and in law, the Ld. CITYA) ignored the fact that the addition was made based on specific information received from the Investigation Wing and supported by material evidence indicating accommodation entries." vi. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the ratio laid down in the case of N.K. Proteins Ltd. us DCIT (Gujarat High Court), wherein it has been held that 100% bogus purchases are liable to be disallowed, especially when the transactions are found to be non-genuine and merely accommodation entries.

B.M. Enterprises 3 ITA No. 5025/MUM/2026

vii. The order of the Ld. CIT(A) is contrary to the provisions of section 69C and settled legal position, and therefore is not sustainable in law. viii. The appellant craves leave to add, alter, amend or withdraw any of the above grounds of appeal at the time of hearing. 3. Subsequently, before this Tribunal, the assessee has pressed Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963, to raise the following legal issue :-

"On the facts and in the circumstances of the case and in law the assessment order passed by AO u/s 143(3) r.w.s. 147 of the Income Tax Act dated 18/02/2016 is bad in law and perverse, void ab initio and deserves to be annulled as the reassessment order passed without disposing off the objections raised by the assessee regarding reopening/initiating reassessment proceedings objected vide letter dated 09/08/2015."

B.M. Enterprises 4 ITA No. 5025/MUM/2026

from four parties, as under, which were alleged to be in the practice of issuing accommodation bills:-

Sr. No. Name of Suppliers Amount (Rs.) 1. Divya Enterprises Rs. 15,61,315/- 2. Kamal Traders Rs. 23,01,730/- 3. Banarsidass Aggarwal & Rs. 26,778/- Sons 4. Varun Steel Rs. 32,28,689/- ------------- Total Rs. 71,18,512/-

The Ld. AO was not satisfied with the explanation/documents furnished by the assessee, and he completed his assessment after making addition @ 12.5% on the disputed purchases as above. In appeal, the Ld. CIT(A) restricted the addition to 5%, relying on the decision of the Ld. CIT(A)'s in the assessee's own case for A.Y. 2011- 12. Relevant extract from the order of the Ld. CIT(A) for A.Y. 2011- 12 is as below :- “4.3.2. The appellant…is in the business of trading in ferrous and non- ferrous metals. The GP in this line of business, normally ranges from 2 to 5%. The appellant has already shown a GP of 8.72% on these purchases. With the estimate of the AO, the GP shoots up to 21.2% which is very high. Presuming that the appellant has made the purchases from the grey market, the benefit that the appellant would have obtained Is the VAT amount which is 4%. Therefore, in order to meet the ends of justice and to have a realistic picture of profit, I feel the

B.M. Enterprises 5 ITA No. 5025/MUM/2026

additional GP to be estimated should be restricted to 5% of such alleged purchases. This would cover up evasion on account of VAT and also any other leakages to revenue. The appellant gets relief of the balance amount. This ground of appeal is partly allowed.” It is against the restriction of additional GP to 5% of the disputed purchases that Revenue is in appeal before this Tribunal.

B.M. Enterprises 6 ITA No. 5025/MUM/2026

it was shown that payment against the purchases had been made by A/c payee cheques. He argued that when the Ld. AO, in page 3 of the assessment order, had accepted the fact that the assessee had filed relevant details, it was unfair on his part to reject the assessee's books of accounts and make addition on account of suppression of profits merely because information had been received from the DGIT (Inv.), Mumbai, and all the purchase parties could not be produced for examination. Otherwise also, the case was reopened on the basis of general statements of third parties, copies of which were not provided to the assessee, and neither was the assessee given any opportunity to cross-examine those parties. Various judicial decisions were cited by the Ld. AR in support of his claim that purchases cannot be held as bogus relying solely on general statements made by supplier before some other Department, that non-appearance of suppliers would not necessarily mean that the purchases were non-genuine, that even in best judgment assessments a honest and fair estimate of real income should be made, and that only real profit embedded in non- genuine purchases could be taxed.

B.M. Enterprises 7 ITA No. 5025/MUM/2026

that needs to be decided here is whether the addition on account of alleged bogus purchases should be estimated @ 12.5% of the disputed purchases or whether the same should be restricted to 5%.

6.1 From records placed before us, we find that in the instant case, the genuineness of the sales turnover of Rs. 10.69 crore has not been doubted at any point either in the course of re-assessment proceedings or appellate proceedings before the lower authorities. Against the aforesaid sales, the assessee has shown corresponding purchases of Rs. 9.51 crore. The Gross Profit for the impugned year has been worked out at 8.28%, which is comparable to 8.80% in the preceding year and 7.69% in the subsequent year. A GP rate of 8.28% does not seem to be unreasonable in the assessee's line of business. If we accept the estimate of 12.5% that the Ld. AO has taken, then the GP will shoot up to 20.78% which is undoubtedly very high. At the same time, however, given the facts and circumstances of the case, the conclusion that seems inevitable is that the assessee would have made purchases from the grey market to avail of benefit of VAT which is 4%. As such, we find no infirmity in the order dated 03/02/2017 of the Ld. CIT(A) in the assessee's own case for AY 2011-12, which has been followed for deciding the impugned issues in A.Y. 2010-11 also.

B.M. Enterprises 8 ITA No. 5025/MUM/2026

6.2 In line with the above, in the interest of justice, we restrict the estimation of the additional GP to 5% of the disputed purchases. We, however, make it clear that the above estimation is confined only to the peculiar facts of the instant case & shall not be understood as laying down a bench-mark applicable to all cases involving alleged bogus purchases.

Order pronounced in the open Court on 31/08/2026

Sd/- Sd/- (BEENA PILLAI) (RATNA DASGPUTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 31/08/2026 Z.U., P.S. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai

B.M. Enterprises 9 ITA No. 5025/MUM/2026

BY ORDER,

//True Copy// (Assistant Registrar) ITAT, Mumbai