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Facts
The Revenue preferred appeals against the CIT(A)'s order which restricted disallowance on bogus purchases by applying the average net profit ratio of the last three years. The assessee had declared total income of Rs. 18,11,456/-, but additions of Rs. 3,33,45,268/- were made by the AO for bogus purchases.
Held
The Tribunal found that the CIT(A) had correctly examined the issue and arrived at a justifiable decision by restricting the disallowance based on the average net profit ratio. The Tribunal found no fault with the CIT(A)'s order.
Key Issues
Whether the CIT(A) was justified in restricting the addition on account of bogus purchases by applying the average net profit ratio of the last three years.
Sections Cited
139(1), 148, 69C
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Income Tax Appellate Tribunal, DELHI ‘E’ BENCH,
Before: SHRI CHALLA NAGENDRA PRASAD, & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
The above captioned two separate appeals by the Revenue are preferred against the order of the ld. CIT(A)/NFAC, Delhi dated 28.03.2025 pertaining to A.Ys. 2016-17 and 2017-18.
& 3387/DEL/2025 [A.Y. 2016-17 & 2017-18] ITO Vs. Shree Shyam Coating 2. None appeared on behalf of the assessee. We decided to proceed ex- parte with the assistance of the ld. DR who was heard at length. Case records carefully perused.
Brief facts of the case are that the assessee for the year under consideration, has e-filed the return of income on 25.01.2017 u/s 139(1) of the Income-tax Act, 1961 [the Act, for short], declaring total income of Rs. 18,11,456/-.
The case was reopened by issuing notice u/s 148 of the Act on 30.03.2021 on account of information that the assessee has taken entries for purchase from paper company. The assessee submitted in return of Income on 26.09.2021 in response to notice u/s 148 wherein a total income of Rs. 18,11,456/- was declared. Subsequently, a show cause notice containing a draft assessment order on 24-03-2022 was issued to the assessee. In response, the assessee filed its reply with the relevant documents. Thereafter, the Assessing Officer, not finding the response of the assessee satisfactory, considered the said purchase as bogus and passed the order of assessment on 30.03.2022 making addition of Rs. 3,33,45,268/- u/s 69C of the Act.
Page 2 of 5 & 3387/DEL/2025 [A.Y. 2016-17 & 2017-18] ITO Vs. Shree Shyam Coating 5. Aggrieved, the assessee went in appeal before the ld. CIT(A) who restricted the disallowance by holding that the average NP in last three years comes at 1.84%. Though the assessee has already paid the tax on the net profit emanated from the sales made out of the impugned bogus purchases, the net profit ratio on the impugned purchases of Rs.
3,15,33,812/- was increased to 2.5% from 1.89%. The Assessing Officer was directed to modify the income accordingly and partly allowed the grounds of the assessee.
Aggrieved by the restriction of the disallowance, the Revenue is in appeal before us in both the years under consideration.
Before us, the ld DR vehemently relied on the orders of the AO.
We have heard the ld DR’s submissions and have perused the relevant material on record. We find that the ld. CIT(A) has given a categorical finding that the average NP in last three years comes at 1.84% and though the assessee has already paid the tax on the net profit emanated from the sales made out of the impugned bogus purchases, the net profit ratio on the impugned purchases of Rs. 3,15,33,812/- is increased to 2.5% from 1.89%.
Page 3 of 5 & 3387/DEL/2025 [A.Y. 2016-17 & 2017-18] ITO Vs. Shree Shyam Coating 10. After perusing the order of the ld. CIT(A), we find that the ld. CIT(A) has examined the issue carefully and has arrived at a justifiable decision.
We, therefore, find no fault in the order of the ld. CIT(A) and decline to interfere with the same. Accordingly, the sole ground raised by Revenue in both the appeals stands dismissed.
In the result, both the appeals of the Revenue in and 3387/DEL/2025 are dismissed.
The order is pronounced in the open court on 20.11.2025.