SH. JATINDER JAIN,LUDHIANA vs. ITO, WARD 2(1), LUDHIANA

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ITA 353/CHANDI/2024Status: DisposedITAT Chandigarh12 November 2024AY 2021-22Bench: SHRI SANJAY GARG (Judicial Member)3 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that only the profit element embedded in purchases from known sources can be added, not the entire purchase value. Considering the assessee's historical net profit rates and the offered rate, no additions were warranted.

What were the facts?

The Assessing Officer doubted the genuineness of purchases made by the assessee and estimated profit at 15%, making an addition. The CIT(A) confirmed this addition. The assessee argued that purchases were from known sources and offered a net profit rate of 1.14%.

What were the issues?

Whether the addition made on account of alleged bogus purchases, by estimating profit at 15%, is justified when the assessee has offered a lower net profit rate and purchases are from known sources.

AI-generated summary — verify with the full judgment below

आदेश/Order

1.

The present appeal has been preferred by the assessee against the order dated 13.02.2024passed by the Ld. Commissioner of Income Tax, National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’], for the Assessment Year 2021- 22.

2.

The sole issue involved in the present appeal is relating to estimation of profits on the alleged bogus purchases.

-Chd-2024 Shri Jatinder Jain, Ludhiana 2 3. The brief facts of the case are that the Assessee made certain purchases from M/s Diksha Yarn Traders, genuineness of which was doubted by the Assessing Officer (A.O.). Though the case of the Assessee is that the Assessee has duly furnished all the documents to prove the genuineness of the purchases. The Assessing Officer , however, held the same as bogus and estimated the profit element /adhoc disallowance @ 15% of the said purchases and thereby making the addition of Rs. 18,23,918/-. The ld. CIT(A) confirmed the addition so made by the A.O.

4.

It has been held time and again that where the purchases have been made out of the known sources of income and the sales have been accepted, only the profits element embedded in such purchases can be added. The Assessing Officer has estimated the same at the rate of 15%, whereas, the Assessee has offered the NP @ 1.14%

5.

Before us, the ld. Counsel for the Assessee, inter alia, has furnished a data relating to the net profit rate of the Assessee for four consecutive years, the details of which are as under: - Assessment year Net profit rate 2018-19 1.33% 2019-20 1.22% -Chd-2024 Shri Jatinder Jain, Ludhiana 3 2020-21 0.79% 2021-22 1.14%

6.

The average of the aforesaid net profit for four consecutive years come to 01.12%, however, the Assessee has already offered the NP @ 1.14%. In view of this, no additions are warranted in this case. The same are ordered to be deleted.

In the result, the appeal of the Assessee stands allowed.

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