SHRI PRANAV NALIN MEHTA,NAGPUR vs. PR.CIT-1, NAGPUR, NAGPUR

The appeal is time barred by 250 days. The assessee has filed an affidavit explaining the reasons for the delay. We are satisfied with the reasons. The delay in filing the appeal is, therefore, condoned and the appeal is admitted for disposal on merits.

Briefly stated, the facts of the case are that assessment in this case was completed by means of an order u/s.143(3) r.w.s.147 assessing total income at Rs.5,60,590/-. The ld. Pr.CIT, on perusal of records, observed that the assessee made unsubstantiated purchases amounting to Rs.6,37,988/- from M/s. Nisha Enterprises which were in the nature of accommodation entries. He noticed that the AO made an addition of Rs.51,677/- to the returned income on this score, being, the gross profit @8.10% on the unsubstantiated purchases of Rs.6,37,988/-. In his opinion, the addition ought to have been made for the full amount of purchases at Rs.6,37,988/-. That is how, he set-aside the assessment order by treating it as erroneous and prejudicial to the interest of the Revenue directing the AO to frame the assessment afresh.

After hearing the rival submissions and going through the relevant material on record, it is seen that the assessee recorded bogus purchases in respect of which the AO made an addition at the gross profit rate at 8.10%. The view point of the ld. Pr.CIT that the addition should have been made for the whole amount of purchases is contrary to various judgments of the Hon’ble High Courts, including, that of the Hon’ble Bombay High Court in Pr.CIT Vs. M/s. Mohammad Haji Adam and Company (2019) 104 CCH 0391 Mum-HC holding that addition cannot be made for the bogus amount of purchases. In Pr.CIT Vs. Batilboi Environmental Engineering Ltd. (2022) 446 ITR 238 (Bom.), the Hon’ble Bombay High Court has held that only the profit element in the bogus purchases can be added and not the amount of purchases. Similar view has been canvassed in PCIT Vs. Paramshakti Distributors Pvt. Ltd. ( dated 15-07-2019).

In view of the above discussion, it is clear that the AO passed the correct order by making the addition towards gross profit on the bogus purchases. The view point of the ld. Pr.CIT that the addition should have been made towards the amount of purchases is, ergo, not sustainable. We, therefore, overturn the impugned order.

In the result, the appeal is allowed.