DCIT, CIRCLE - 1(1)(1), AHMEDABAD, AHMEDABAD vs. B CHOKSHI CHEM PVT LTD, AHMEDABAD

332/Ahd/2025 2018-19 The Dy.CIT Circle-1(1)(1) Ahmedabad

The brief facts of the case are that a search action u/s.132 of the IT Act was carryout in the case of one Gujarat Polysol Chemicals Ltd. (GPCL). During the search action, certain incriminating material were found from which the Investigation Wing observed that the said GPCL was indulged in bogus purchases for the purpose of reducing its tax liability. It was found that some of the purchases were made by the GPCL from the assessee- company also. During the assessment proceedings, the additions were made in the income of the GPCL by the Assessing Officer (AO) on account of bogus purchases made from the assessee. Since the addition was made on account of bogus purchases, therefore, the AO was of the belief that the assessee was indulged in bogus sales and the income of the assessee, for the year under consideration, had escaped assessment. Accordingly, the assessment of the assessee was reopened u/s.147 of the Act. The AO made the addition of the entire sales consideration paid by the assessee to GPCL treating the same as bogus and made the impugned addition on account of bogus sale transactions of Rs.4,67,95,179/-.

Being aggrieved by the said order of the AO, the assessee preferred appeal before the Ld.CIT(A).

During the appellate proceedings before the Ld.CIT(A), the assessee brought to the knowledge of the Ld.CIT(A) that in the case of Gujarat Polysol Chemicals Ltd., the addition made by the AO on account of bogus purchases have been deleted. That the matter travelled upto the level of the Tribunal in the case of Gujarat Polysol Chemicals Ltd. (GPCL), wherein, Coordinate Surat Bench of the Tribunal for AY 2018-19 in ITA Nos.513 & 595/SRT/2023 (cross- appeals), common order dated 28/12/2023, in paragraph Nos.13 & 14 has deliberated upon the issue of the alleged bogus purchases made by the GPCL and has held that the said purchases as per the data available on record cannot be said to be bogus. However, the Tribunal, even otherwise, held that only profit element embedded in bogus purchase is to be brought to tax and considering that the said GPCL had shown a good profit of Rs.8.68% and in order to avoid any possibility of Revenue leakage had increased the said gross profit to 9%.

Now, in the case of the assessee, the impugned additions have been made only on the ground that the said GPCL had made bogus purchases and, therefore, such sales made by the assessee to the GPCL were also bogus. However, it is pertinent to note here that there is no finding/conclusion arrived at either by the Ld.CIT(A) or by the ITAT in the case of GPCL that the said concern had made bogus purchases from the assessee and further that the small addition was made estimating the gross profit only on estimation basis without any finding that the said GPCL has made bogus purchases from the assessee.

1. The Ld.Representatives of both the parties have also produced on record the subsequent appellate order in the case of Gujarat Polysol

2. In the present case, even otherwise, there is no finding given by the AO that the assessee had indulged in bogus purchases. Since the purchases have not been doubted, there was no question in doubting the sales also. It is not understandable that how the addition can be made on account of bogus sales when the AO had not doubted the purchases made by the assessee and even without disputing the stock in trade. Hence, these appeals of the Revenue, having no merit, are hereby dismissed. Moreover, the very basis on the basis of which the impugned additions were made, i.e. bogus purchases from Gujarat Polysol Chemicals Ltd., the issue relating to which travelled upto the level of Tribunal and no adverse findings have been given in the case of GPCL, hence, the said basis has ceased to exist for the purpose of making the addition in the case of the assessee. In view of this, the impugned additions have rightly been deleted by the Ld.CIT(A). We do not find any merit in this appeal of the Revenue and the same is, accordingly, dismissed.

Since the facts and issued involved in these appeals is identical to that has been discussed above, hence the finding given above will mutatis mutandis apply to these appeals also.

In the result, all the appeals of the Revenue stand dismissed.

अपीलाथ$ / The Appellant 2. !%थ$ / The Respondent. 3. संबंिधत आयकर आयु& / Concerned CIT 4. आयकर आयु& ) अपील ( / The CIT(A)- (NFAC), Delhi 5. िवभागीय !ितिनिध , अिधकरण