Loading judgment…
Facts
The revenue filed an appeal against the order of the NFAC which directed the AO to add the gross profit element from bogus purchases. The AO had initially made an addition of 12.5% on the total bogus purchases amounting to Rs. 16,02,708/-, totaling Rs. 2,00,339/-.
Held
The Tribunal noted that the AO himself estimated the profit at 12.5% of the bogus purchases. Therefore, the direction by the CIT(A) to add only the gross profit element was found to be redundant as the AO had already made a profit addition based on an estimation.
Key Issues
Whether the CIT(A) erred in directing the AO to make an addition of gross profit element from bogus purchases when the AO had already estimated profit at 12.5%.
Sections Cited
Section 40(A)(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “(SMC
Before: SHRI NARENDRA KUMAR BILLAIYA, HON’BLE & SHRI SUNIL KUMAR SINGH, HON’BLE
O R D E R PERNARENDRA KUMAR BILLAIYA, AM This appeal by the revenue is preferred against the order dated 28.07.2023 of ld. NFAC, Delhi pertaining to Assessment Year 2011-12.
The sum and substance of the grievance of the revenue is that the ld. CIT(A) erred in directing the AO to make addition of gross profit element embedded in the bogus purchases.
None appeared on behalf of the assessee in spite of notice. We decide to proceed ex-parte. 4. `Briefly stated the facts of the case are that as per the information available on record, the AO came to know that the assessee has availed accommodation entries from persons indulged in issue of bogus purchases and sale bill without Universal Enterprises 2 actual delivery of goods. As per the information from the Sales Tax Department the assessee has purchased goods to the tune of Rs. 16,02,708/- which are bogus. The assessee was asked to explain the genuineness of the purchase. The assessee furnished ledger extracts of all the parties stating that the payment to the sellers have been made through account payee cheques. The explanation of the assessee did not find any favour with the AO who completed the assessment by making addition @12.5 % of the purchases and added a sum of Rs. 2,00,339/-.
The assessee carried the matter before the ld. CIT(A) and explained that the assessee is a trader engaged in the business of trading in ball bearings and roller bearings and its accessories and is authorised distributors of M/s. SKF India Ltd &Others. It was strongly contended that the assessee purchased the goods from suppliers and resale the same locally being the normal practice of business. It was brought to the notice of the ld. CIT(A) that the assessee has submitted the sample copies of the purchase bills, copies of bank statement and copies of movement of stock. The additions and disallowances have been made purely on estimated basis without any concrete evidences. After considering the facts and submissions and drawing support from the several judicial precedents the ld. CIT(A) came to the conclusion that only gross profit element embedded in the bogus purchases should be added and directed the AO accordingly.
We have carefully perused the orders of the authorities below. We find that AO has himself estimated the profit of 12.5% of the bogus purchase since the assessee has not furnished any ratio analysis in respect of his trading results and since the AO has made the addition estimating the gross profit we do not find any merit in the direction of the ld. CIT(A) as the profit addition to the Universal Enterprises 3 extent of profit element has already been made by the AO which calls for no further interference to the order of the ld. CIT(A) and is accordingly set aside and the appeal is dismissed.