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Facts
The revenue filed an appeal against the order of the NFAC-Delhi, which had restricted an addition concerning bogus purchases to 4.76% instead of 12.5%. The assessee had claimed purchases from six hawala traders, who provided accommodation entries, and the AO had rejected the books of accounts and made an addition at 12.5% of the total bogus purchases.
Held
The Tribunal upheld the decision of the Ld. CIT(A) which had directed the AO to restrict the addition on bogus purchases by bringing the GP rate on such purchases at the same rate as that shown on genuine purchases. The Tribunal noted that this issue was recurring and had been decided in favour of the assessee by coordinate benches in previous assessment years.
Key Issues
Whether the addition on account of bogus purchases should be restricted to the Gross Profit (GP) rate of genuine purchases, or disallowed at the higher rate claimed by the AO, considering the assessee's past favourable decisions.
Sections Cited
250, 148, 145(3)
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Before: SHRI AMIT SHUKLA & SMT. RENU JAUHRI
आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the revenue against the order of the National Faceless Appeal Centre (NFAC)-Delhi, dated 13.09.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year: 2011-12.
The revenue has raised the following grounds of appeal:
1. “1. "Whether on the facts and in the circumstances of the case and in law, the Id CIT(A) has erred in restricting addition made @4.76 % as against @ 12.5% of total bogus purchases of Rs. 5,79,12,219/- from six hawala traders, by ignoring the fact that the Sales Tax Department Maharashtra State, has proved beyond doubt that parties declared as hawala traders were involved in providing accommodation entries of purchases and the assessee was found to be one of the beneficiary of accepting accommodation entry for the purchase?"
2. Whether on the facts and in the circumstances of the case and in law, the Id CITYA) has erred in restricting addition made @ 4.76 % as against @ 12.5% of total bogus purchases of Rs. 5,79,12,219/- from 6 hawala traders, by ignoring the fact that Sales Tax Department and subsequently, the DGIT (Iru), Mumbai during their course of investigation found that the alleged bogus parties have providing accommodation/bogus purchase bills only without delivering any yoods and it was found that the assessee was one of the beneficiary, who has availed accommodation entries through bogus bills from six hawala traders? 3. Whether on the facts and in the circumstances of the case and in law, the Id CIT(A) has erred in restricting addition made @ 4.76 % us against @ 12.5% of total bogus purchases of Rs. 5,79,12,219/- from six hawala traders, by ignoring the fact that during the Re-assessment proceedings, the assessee could neither produce the quantity tally of day to day purchases, Sales, Stocks and corresponding values nor could produce any delivery challans, lorry Receipts/invoices and transportation details and the six parties for verification, in spite of opportunity provided by the Assessing Officer ?"
4. Whether on the facts and in the circumstances of these und in law, the lid CITYA) Tuan erred in restricting addition mode 4.70 12. Of total bogue purchases of Rs. 5.79.12.219/-prom & hawala trader without appreciating the fact that the Assessing officer has traders/parties, which were returned back by the postal department with a remarked left/not known/ non-traceable ", which proved that all these hawala brudera/parties were baigus anul not 5. Whether on the facts and in the circumstances of the case and in law, the la CITIA) has erred in restricting addition made 4.76 % as against 12.5% of total bogus purchases of Rs. 5,79,19,219/- from 6 hawala traders by ignoring the fact that the assessee has nailed accommodation entries from six hawala traders and failed to discharged its primary onus in establishing the identities of hawala traders from whom the alleged purchases were purportedly made P 6. Whether on the facts and in the circumstances of the case and in law, the Id CITA) has eared in restricting addition made @4.76% as against @ 12.5% of total bogus purchases of Rs. 5,79,12,219/- from six hawala traders, without appreciating the ratio of the decision of the decisions of Hon'ble Bombay High Court in case of PCIT VS S. V. Jiwant (2022) 145 taxmann.com (Bombay) and Hon'ble Gujarat High Court in case of CIT Vs Simit Sheth, wherein the Court has held that when the purchases are from bogus suppliers, the purchases 12.5% are liable to disallowed?" 7. "Whether on the facts and in the circumstances of the case and in law, the Id CITTA) has erred in restricting addition made @4.76 % as against 12.5% of total bogus purchases of Ra 5,79,12,219/- from 6 hawala traders, without appreciating the decision of the Hon'ble Supreme Court in the case of N.K. PROTEIN Ltd Vs. Dy. CIT(2016) 292 CTR (Guj.) 354, Dated. 16.01.2017, wherein the Hon'ble Court has held that, when the purchases are from bogus suppliers, the entire purchases are liable to disallowed ? 8. Whether on the facts and in the circumstances of the case and in low, the id CITYA) has erred in restricting addition made 4.76% as against @ 12.5% of total bogus purchases of Rs. 5,79,12,219/- from 6 hawala traders, without considering the order in the case of Swetambar Steels Ltd. (Supra), of the Hon'ble ITAT, Ahmadabad, wherein the Hon'ble ITAT had confirmed the disallowance of the bogus/suspicious purchases, by stating that the purchases shown from the hawala parties were found non- genuine and further, appeal against the decision of Hon'ble ITAT was not admitted by the Hon'ble Gujarat High Court and the assessee had also lost before the Hon'ble Supreme Court.
9. Whether on the facts and in the circumstances of the case and in law, the is CITIA) hon erred in restricting addition made 4.75% as against 12.50% of total bogus purchases to Rs. 5,79,12,219/- from six hawala traders, without considering that after invocation of provisions of section 145(3) of the Act, the Assessing Officer acquired the mandate even to add the whole amount of purchases found as bogus to the total income of the assessee. One such case is Sri. Ganesh Rice Mills Vs. CIT 294 ITR 316 (ATI), wherein the entire amount of bogus purchases, from the hawala parties, was disallowed and same was also upheld"
10. This appeal is being filed as it is covered under the exception provided in para 3. of the boards Instruction No. 279/Misc. 142/2007-TUP), Circular No. 5/2024 Dated. 15.03.2024 of the CBDT, New Delhi 11. The appellant craves, leave to amend or alter any grounds or add a new ground which may be necessary."
Brief facts of the case are that the assessee filed its return declaring income of Rs. 6,93,332/- for AY 2011-12 on 28.09.2011. The assessee is trading in ferrous and non-ferrous metals. Based on the information received from the DGIT (Inv.) the case was reopened and notice u/s. 148 was issued on 26.02.2015. It was noted by the Ld. AO that the assessee was involved in obtaining accommodation entries of non-genuine purchases from six parties for a total amount of Rs. 5,79,12,219/- during the year. These parties had admitted in front of the sales tax authorities that they did not make any sales or purchase transactions and were merely providing accommodation bills. During the course of assessment proceeding, the assessee furnished stock statement and other details. However, no other documents such as lorry receipts, transportation details of goods purchased were produced. Accordingly, Ld. AO came to the conclusion that since the sales were claimed to be genuine, the accommodation entries were obtained for introducing unaccounted goods into the accounting stream. He, therefore, rejected the assessee’s books of accounts u/s. 145(3) of the Act and made an addition @ 12.5% of the total amount of Rs. 5,79,12,219/- being non-genuine purchases. Aggrieved with the order of Ld. AO, the assessee preferred an appeal before Ld. CIT(A). It was submitted by the assessee before the Ld. CIT(A), that the issue is a recurring one and has been decided in its favour by the co-ordinate benches for AYs 2010-11 and 2011-12 vide order dated 15.10.2019. Accordingly, Ld. CIT(A), following the decision of the co-ordinate bench, directed the AO to restrict the addition with regard to bogus purchases by bringing GP rate on such purchases at the same rate as that of other genuine purchases. Aggrieved with the order of Ld. CIT(A), revenue has preferred an appeal before the Tribunal. All the grounds of appeal relate to the rate applied on bogus purchases.
Before us, Ld. DR has pointed out that in several other cases of similar nature, the entire amount of bogus purchases from hawala parties were disallowed and the same has been upheld by appellate authorise. In this regard, Ld. DR pointed out that in the case of NK Proteins Ltd. vs DCIT (2016) 292 CTR 354, the entire purchases from bogus suppliers were disallowed and the same was upheld in appeal. Further, Ld. DR has cited the case of Sri. Ganesh Rice Mills vs. CIT 294 ITR 360 (ALL), wherein the entire bogus purchases form the hawala parties were disallowed and the same was also confirmed by the Hon’ble High Court. It is the case of the department that even in the present case, Ld. AO could have added the entire amount of purchases found as bogus to the total income, keeping in view the decisions cited in the grounds of appeal and also disallowed hereinbefore. He has, therefore, argued that the addition made @12.5% of to the bogus purchases by the Ld. AO should be upheld.
5. On the other hand, Ld. AR vehemently argued that in the assessee’s own case for AYs 2009-10 & 2010-11 as well as for AY 2012-13, same issue has been decided by the coordinate benches in assessee’s favour. Accordingly, Ld. CIT(A) has rightly followed the decisions of the coordinate benches in preceding years to hold that the addition in respect of non-genuine purchases should be restricted by bringing the GP rate on such purchases at the same rate as that shown on the genuine purchases. In this regard, a chart showing the calculation of GP ratio has been submitted by the Ld. AR, which is reproduced below:
In view of above, Ld. AR has, submitted that the order of Ld. CIT(A) should be upheld.
We have heard the rival submissions and perused the material available before us. Admittedly, the issue is a recurring one and has been decided by the coordinate benches in AYs 2009-10, 2010-11 and 2012-13. Ld. CIT(A) has simply followed the decision of the coordinate benches and directed the AO to restrict the addition on the same lines as in this case. Accordingly, we are of the considered opinion that the decision of Ld. CIT(A) is justified and therefore no interference is called for. We accordingly uphold the direction of Ld. CIT(A). In view of above, the appeal of the revenue is dismissed.
In the result, appeal of the revenue is dismissed.
Order pronounced in the open court on 18.08.2025. Sd/- Sd/- AMIT SHUKLA RENU JAUHRI (न्यानयक सदस्य/JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER) Place: म ुंबई/Mumbai दिन ुंक /Date 18.08.2025 दिव्य रमेश न ुंिग वकर/ स्टेनो आदेश की प्रनतनलनि अग्रेनित/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यानित प्रनत //True Copy// आदेशािुसार/ BY ORDER,