RAMJIBHAI KESARAJI PATEL,VADODARA vs. THE ITO, WARD-1(2)(2), VADODARA

The Ld. CIT(A), however, dismissed the appeal of the assessee in limine, citing delay in filing the appeal and the assessee’s failure to furnish any explanation for the same.

Before us, the Ld. AR submitted that that the purchases made in question were genuine. It was further contended that during the course of the assessment proceedings, the assessee had furnished complete details of the purchases made from Laxmiraj Enterprise and Raghav Traders. These details were submitted to the Assessing Officer through a paper book uploaded on 17.02.2023. The Ld. AR submitted that a perusal of the documents, including the bank statements submitted, clearly substantiates the genuineness of the purchases. The Ld. AR contended that the books of accounts of the assessee are duly audited by accountant, the purchases are subject to VAT regime and payments have been made by banking channel. The Ld. AR also submitted that the Assessing Officer Ramjibhai Kesaraji Patel Vs. ITO Asst. Year : 2018-19 - 3– has accepted sales offered by the assessee and has not questioned the purchases claimed by the assessee. The Ld. AR therefore requested that, in view of the above facts, the addition made by the Assessing Officer may be deleted.

In an alternative submission, the Ld. AR submitted that the addition of entire purchase amount is unjustified; at the most, an estimated disallowance of profit embedded in purchases is warranted.

We have heard the rival contentions and perused the material available on record.

From the documentary evidence submitted by the assessee, including VAT invoices, bank statements, and audited books of accounts, it is evident that the sales disclosed by the assessee have not been disputed or doubted by the Assessing Officer with complete evidences. It is also fact on record that concerns have been raised regarding the genuineness of certain suppliers, particularly in light of the history and evidences of accommodation entry providers. In this context, it is a well-settled principle of law, as consistently upheld by the Hon’ble Gujarat High Court and Hon’ble Bombay High Court in the decisions cited before us, that in cases involving suspected bogus purchases, the entire value of such purchases should not be disallowed. Instead, only the profit element embedded within such purchases, being the portion that may represent unexplained or unverifiable expenditure, is liable to be brought to tax, so as to prevent the leakage of revenue.