GANPAT METAL,MUMBAI vs. ITO, WARD-19(1)(3), MUMBAI

Shri Aditya Ramachandran, appearing on behalf of the assessee submitted that the solitary ground in this appeal is against the addition made on account of alleged bogus purchases. The ld.Authorized Representative of the assessee submitted that in reassessment proceedings, the Assessing Officer observed that assessee had indulged in obtaining bogus purchase bills aggregating to Rs.59,69,054/- from various hawala parties. The Assessing Officer estimated GP @ 12.5% on the alleged bogus purchases and made addition of Rs.7,46,132/-. Aggrieved against the assessment order dated 07/03/2016 passed under section 144 r.w.s. 147 of the Income Tax Act, 1961 ( in short ‘the Act’), the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee and confirmed addition.

The ld. Authorized Representative for the assessee contended that the assessee is engaged in the business of trading in ferrous and non-ferrous metals. The GP @ 12.5% estimated by the authorities below is very much on the higher side. The ld. Authorized Representative for the assessee placed reliance on the decision of Tribunal in the case of Mukesh Samarthmal Jain vs. ITO, in decided on 31/01/2020, wherein GP @ 4% on alleged bogus purchases was determined.

On the other hand, Shri Amit Pratap Singh, representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee.

We have heard rival sides and have perused the orders of authorities below. The addition has been made on account of bogus purchases. It is a well settled legal position now, that where the assessee has indulged in bogus purchases and sales have not been disputed by the Revenue, it is only profit element embedded in the bogus purchases that should be brought to tax. The Assessing Officer estimated GP @12.5% on the alleged bogus purchases. The same has been confirmed by the CIT(A). Taking into consideration the nature of assessee’s business and surrounding circumstances, we are of considered view that ends of justice would be served if GP on bogus purchases is restricted to 8% over and above GP declared by the assessee. Thus, the appeal of assessee is partly allowed in the terms aforesaid.

In the result, appeal of the assessee is partly allowed.