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Facts
The assessee's appeal is against the order confirming an addition made by the AO for disallowing purchases of Rs. 7,16,78,802/-, holding them to be bogus. The assessee argued that the AO did not dispute sales or profits and that the ex-parte order was due to a director's medical emergency.
Held
The Tribunal noted that the AO did not dispute the sales or the profit margin disclosed by the assessee. The Tribunal observed that if purchases were not proved genuine, only the profit element could be added, not the entire purchase amount, as there was no allegation of purchases from an unexplained source.
Key Issues
Whether the entire purchase amount could be added as bogus without disputing the sales, or if only the profit element should be considered, especially when an ex-parte order was passed without hearing the assessee.
Sections Cited
250
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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: SRI SANJAY GARG & SRI SANJAY AWASTHI
order
: 16.01.2025 ORDER
Per Sanjay Garg, Judicial Member:
The present appeal filed by the assessee is directed against the order dated 08.05.2024 of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for Assessment Year 2021-22.
I.T.A. No.: 1472/KOL/2024 Assessment Year: 2021-22 Samriddh Wire Products Pvt. Ltd.
The assessee is aggrieved by the action of the Ld. CIT(A) in confirming the addition made by the AO on account of disallowance of purchase of Rs.7,16,78,802/- holding the same as bogus and thereby suppressing the profits.
At the outset, the Ld. Counsel for the assessee has submitted that the Assessing Officer (AO) has not disputed the sales. He submitted that the assessee is involved in the business of manufacturing as well as trading. That the purchase of raw material was made by the assessee which was used for manufacturing activity and further the excess purchase material was traded also as such. That the AO has neither disputed the sales nor the profits disclosed by the assessee @ 4.8% shown by the assessee on sales. He, however, made certain enquiries relating to the purchases and since no satisfactory reply was received from the concerned parties, therefore, he made the addition in respect of the purchase of Rs.7,16,78,802/- holding the same as bogus. The Ld. CIT(A) confirmed the addition as made by the AO.
The Ld. Counsel for the assessee, at the outset, has invited our attention to the impugned order of the Ld. CIT(A) to submit that the same is an ex parte order. The Ld. Counsel has submitted that the assessee company was run by two directors, who are husband and wife. That Smt. Urmila Ruia, one of the directors, was suffering from severe medical problems during the period and both the husband and wife were worried and involved in her medical treatment, therefore, there was no appearance before the Ld. CIT(A).
The Ld. Counsel has further explained that in this case, the assessee is involved in manufacturing as well as in trading activity. That the total turnover of the assessee for the year under consideration were Rs.25,28,22,422/- and the total purchases of the assessee for the year were of Rs.29,14,77,385/-. The Ld. Counsel has further submitted that out of the aforesaid sales, the total amount of sales relating to the goods manufactured by the assessee were at Rs.2 Cr. only and the rest of the sales were relating to trading activity of the assessee only. He has further submitted that since the sales of the assessee from the trading activity have not been disputed and even the sales from manufacturing activity have also not been disputed, Page 2 of 3