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Facts
The assessee, engaged in trading ferrous and non-ferrous metals, filed a return for AY 2009-10. Information from DGIT (Investigation) revealed the assessee made purchases of ₹42,32,703/- from parties allegedly involved in providing bogus purchase bills. The Assessing Officer made an addition of 25% on alleged bogus purchases.
Held
The Tribunal held that while the assessee could not prove the genuineness of purchases, there was a one-to-one correlation between alleged bogus purchases and sales. Following the principle of adding only the profit on untainted purchases, the Tribunal directed the Assessing Officer to recalculate the addition based on the difference in gross profit earned.
Key Issues
Whether the addition for alleged bogus purchases should be based on the entire purchase value or only the profit element. Whether the reopening of assessment was justified.
Sections Cited
147, 143(3), 148, 143(2), 133(6), 145(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI KULDIP SINGH, JM
This appeal is filed by Income Tax Officer, Ward 19(3)(1), Mumbai for A.Y. 2009-10, against the appellate order passed by the National Faceless Appeal Centre, Delhi [the learned CIT (A)] dated 8th November, 2023, wherein the
The assessee is aggrieved with the same preferred the appeal before the learned CIT (A), who after elaborate discussion following judicial precedents, held that the rate determined by the learned Assessing Officer at the rate of 25% is excessive. He upheld the addition at the rate of 12.5% on bogus purchases of ₹42,32,703/-, thereby confirming the addition of ₹5,29,088/-. He also confirmed the reopening of the assessment. Therefore, the learned Assessing Officer is in appeal and assessee filed cross objection.
The learned Departmental Representative vehemently supported the order of the learned Assessing Officer and submitted that the addition should be upheld at the rate of
We have carefully considered the rival contentions and perused the orders of the lower authorities. Undoubtedly, the assessee could not prove the genuineness of the purchases which are found in the information received from the DGIT Investigation. However, the purchase of ₹42,32,703, were shown by the assessee by a chart showing that the purchases from these parties have also gone into sales of the equal quantity. The assessee has also got his account tax audited where the quantitative details are available. In such circumstances, it is settled principle that only profit which is less than the profit shown on untained purchases should be compared and difference is required to be added to the total income of the assessee. Hon'ble Bombay High Court in M/s Mohd. Haji and Company (supra), has also upheld the same principle. In the present case, the assessee has also shown one to one co-relation between the quantity of the alleged bogus purchases and consequent sales accounted there from. In view of this, we direct the learned Assessing Officer to work out the addition only to the extent of the difference in gross profit earned in such tainted purchases with gross profit earned in untainted purchases. The assessee is directed to furnish the requisite information before the learned Assessing Officer
In the result, the appeal filed by the learned Assessing Officer is dismissed and cross objection of the assessee to the above extent is allowed.
Order pronounced in the open court on 27.06.2024.