GIRISH NARPATCHAND KANUNGO ,MUMBAI vs. INCOME TAX OFFICER 19(1)(3), MUMBAI

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ITA 1233/MUM/2025Status: DisposedITAT Mumbai24 July 2025AY 2011-12Bench: SHRI NARENDRA KUMAR BILLAIYA, ACCOUNT MEMBER, SHRI ANIKESH BANERJEE (Judicial Member)1 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal, following the decision of the Hon'ble Jurisdictional High Court, restricted the addition to the average gross profit rate of 2.73% earned by the assessee in the business line, considering that the assessee had furnished relevant documents for purchases which were not rejected by the AO.

What were the facts?

The assessee's case was reopened under Section 148 of the Income-tax Act, 1961, based on information from the Sales-tax Department. The Assessing Officer (AO) added 12.5% of alleged bogus purchases amounting to Rs. 4,73,87,306/- as income.

What were the issues?

Whether the addition made by the AO on account of alleged bogus purchases at a rate of 12.5% is justified, or if it should be restricted to the average gross profit rate of the assessee's business.

Which sections of the Income-tax Act were involved?

Section 139(1),Section 148,Section 143(3),Section 250,Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI

Before: SHRI NARENDRA KUMAR BILLAIYA, ACCOUNT MEMBER & SHRI ANIKESH BANERJEE

For Appellant: Shri Pankaj Jain
For Respondent: Shri Swapnil Choudhary – Sr AR
Hearing: 21/07/2025Pronounced: 24/07/2025

O R D E R Per Anikesh Banerjee (JM):

Instant appeal of the assesse was filed against the order of National Faceless Appeal Centre (NFAC), Delhi, [in short, ‘Ld.CIT(A)] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) for Assessment Year 2011-12, date of order 28/03/2024. The impugned order emanated from the order of the Income- tax Officer-19(1)(3), Mumbai [in short, “Ld. AO”] passed under section 143(3) r.w.s. 147 of the Act, 1961, date of order 26/06/2016.

2 ITA 1233/Mum /2025 Girish Narpatchnd Kanunga 2. the brief facts of the case are that the assesse filed the return under section 139(1) of the Act. The case was reopened under section 148 of the Act on the basis of information received from Sales-tax Department and the same has been forwarded by the DGIT (Inv), Mumbai to the Ld. AO. During the assessment proceedings, the Ld.AO found that the assesse has made bogus purchases amount Rs.4,73,87,306/-. The Ld.AO considering the assessee’s business and verified the few parties related to alleged purchases had confirmed the addition @12.5% of gross profit on alleged purchase which comes to Rs.59,23,413/-. The assessee prayed that the gross profit related to the impugned year & earlier years is far below the assessed rate of 12.5%. The assesse prayed that the addition should be confirmed @2.73% gross profit (in short “GP”) ratio. Accordingly, the assesse filed an appeal before the Ld.CIT(A). The Ld.CIT(A) upheld the order of the Ld.AO. Being aggrieved, assessee filed an appeal before us.

3.

The Ld.AR filed a paper book which is kept on record. The assessee has submitted preceding 3 years and succeeding one year GP ratio, which is reproduced as below: - Particulars Assessment Years 2008-09 2009-10 2010-11 2011-12 2012-13 Turnover 13,75,75,895 9,45,95,436 8,04,76,094 14,64,44,990 21,44,67,975 Gross Profit 24,10,269 23,06,806 32,45,261 40,02,446 49,82,272 G.P.Ratio 1.75% 2.44% 4.03% 2.73% 2.32% Net Profit 5,98,165 5,99,774 6,23,463 10,27,663 11,42,425 N.P. Ratio 0.43% 0.63% 0.77% 0.70% 0.53% The Ld.AR further argued that considering above GP ratio, the average gross profit is determined to 2.73%, which is liable to be confirmed related to the alleged purchases, amount to Rs.4,73,87,306/-. The Ld.AR respectfully relied on the order

3 ITA 1233/Mum /2025 Girish Narpatchnd Kanunga of Hon’ble Bombay High Court in the case of CIT-1, Mumbai vs M/s Nikunj Exim Enterprises Pvt Ltd Income Tax Appeal No. 5604 of 2010, date of order 17/12/2012. The relevant para 7 is reproduced as below:- “7 We on have considered the submission behalf of the revenue. However, from the order of the Tribunal dated 30.04.2010, we find that the Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement i.e. reconciliation statement, but also in view of the other facts. The Tribunal records that the Books of Accounts of the respondent-assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department i.e. Defence Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were infact made. In our view, merely because the suppliers have not appeared before the Assessing Officer CIT(A), one cannot conclude that the purchases were on or the not made by the respondent-assessee. The Assessing Officer as well as CIT(A) have disallowed the deduction of Rs.1.33 crores on account of purchases merely the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchases of Rs.1.33 crores was not bogus. No fault can be found with the order dated 30.04.2010 of the Tribunal.”

4.

The Ld.AR further stated that the relevant documents are duly submitted before the Ld.AO related to evidence of the alleged purchases. The relevant para 6 of the assessment order is duly reproduced as below: - “6. Based on the information, an independent inquiry was made by this office and details were called for from the assessee as per notices u/s 142(1) dated 06.04.2016 and 16.12.2016. The assessee was asked to produce certain details and also the purchases from above mentioned parties as per Annexure- A.

4 ITA 1233/Mum /2025 Girish Narpatchnd Kanunga (a) Name of the Seller with current full address, (b) PAN (c) Bill and Voucher No. with date(d) Description of goods purchased (e) Quantity (1) Rate, (g) Amount (h) Goods dispatched from (name of the place) with date

(i) Mode of transportation, if by Road Vehicle No. and also payments, detailed in the annexure-A.”

5.

The Ld.DR fully stands in favour of the order of the revenue authorities but was unable to rebut by submitting any of the contrary judgement.

6.

We have heard the rival submissions and perused the material available on record. The Ld. AO determined the gross profit rate at 12.5% on the alleged bogus purchases amounting to Rs. 4,73,87,306/-. The assessee submitted a year-wise chart analyzing the gross profit for Assessment Years 2008-09 to 2012-13, which reflects an average gross profit rate of 2.73% in the assessee’s line of business. Upon perusal of the impugned assessment order, we observe that the assessee had furnished all relevant documents in support of the purchases, and such evidence was not rejected by the Ld. AO. Respectfully following the decision of the Hon’ble Jurisdictional High Court in the case of M/s. Nikunj Exim Enterprises Pvt. Ltd. (supra), we restrict the addition to the extent of 2.73% gross profit rate on the alleged bogus purchases pertaining to the impugned assessment year. The Ld. DR had not made any strong objection against the submission of the Ld. AR. Accordingly, the matter is remanded to the file of the Ld. AO with a direction to modify the assessment order in light of the above observations and in accordance with law.

5 ITA 1233/Mum /2025 Girish Narpatchnd Kanunga 7. In the result, the appeal of the assesse bearing

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