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Facts
The assessee, M/s. Sai Diamonds, was found to have taken accommodation entries amounting to Rs. 39,65,372/- from Kalash Enterprises. The Assessing Officer added the entire amount as income from bogus purchases. The CIT(A) restricted the disallowance to 6% of the bogus purchases based on a previous tribunal decision in the assessee's own case, but without considering the gross profit already declared.
Held
The Income Tax Appellate Tribunal held that the CIT(A) erred in not granting relief for the gross profit already declared by the assessee. Considering the assessee's declared gross profit of 3.67%, the Tribunal directed the Assessing Officer to restrict the addition to 2.33% (6% - 3.67%) of the bogus purchases to ensure consistency with prior decisions.
Key Issues
Whether the addition made for bogus purchases should be restricted to a percentage of the purchase value, and whether the gross profit already declared by the assessee on such purchases should be reduced from this restricted addition.
Sections Cited
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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, HON’BLE & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE
PER NARENDRA KUMAR BILLAIYA, AM: I.T.A. No. 6452/Mum/2024 & I.T.A. No. 6509/Mum/2024 are cross appeals preferred by the assessee and the revenue against the order of the ld. CIT(A) - 51, Mumbai, pertaining to AY 2010-11. 2. The assessee is aggrieved by the addition of Rs. 2,37,922/- being 6% of Rs.39,65,372/- considered as bogus purchases. The revenue is in I.T.A. No. 6509/Mum/2024 2 appeal against the restriction of the addition of Rs.39,65,372/- to Rs.2,37,922/-.
Briefly stated, the facts of the case are that on receiving information from DGIT (Inv.), Mumbai, the AO came to know that the assessee has taken accommodation entries from a transaction with Rajendra Jain Group amounting to Rs.39,65,372/-. The name of the entry provider was Kalash Enterprises. The AO treated the entire gains of bogus purchases as income of the assessee and added the same. The addition was challenged before the ld. CIT(A) and before the appeal could be decided, the Co-ordinate Bench in assessee’s own case in AY 2012-13, on identical set of facts, adopted 6% as fair estimation of the profit element imbibed in alleged bogus purchases and directed the AO to restrict the disallowance to 6% of the bogus purchase, reduced by the gross profit margin already declared by the assessee in respect of alleged bogus purchases.
However, taking a leaf out of the above findings of the Co- ordinate Bench, the ld. CIT(A) simply directed the AO to restrict the disallowance to 6% of the bogus purchases without giving any relief to the gross profit already declared by the assessee on the alleged bogus purchases.
We find that in the year under consideration, the gross profit shown by the assessee is 3.67%. Therefore, the assessee will get relief to this extent. The AO is directed to restrict the addition to 2.33% of the I.T.A. No. 6509/Mum/2024 3
alleged bogus purchase which will be in line with the decision of the Co-ordinate Bench (supra).
In the result, appeal of the assessee is partly allowed and that of the revenue is dismissed. Order pronounced in the Court on 20th February, 2025 at Mumbai. (SAKTIJIT DEY) (NARENDRA KUMAR BILLAIYA) VICE-PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated /02/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs
आदेश की "ितिलिप अ"ेिषत /Copy of the Order forwarded to : अपीलाथ" / The Appellant
""थ" / The Respondent 2. संबंिधत आयकर आयु" / Concerned Pr. CIT 3. 4. आयकर आयु" अपील ( ) / The CIT(A)- िवभागीय "ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 5. 6. गाड" फाई/ Guard file.
आदेशानुसार/ BY ORDER