2019 (3) TMI 1065 - AT - Income Tax

Addition u/s 69C - bogus non-genuine expenditure - GP rate determination - HELD THAT - As per the chart reproduced by Ld. CIT(A) at Pg. No. 16 of the impugned order, assessee was having a turnover of ₹ 10.19 Crores in AY. 2008-09 and in that year, the assessee reported GP percentage at 5.20%. In AY. 2011-12, the turnover reported by the assessee is ₹ 21.83 Crores and assessee disclosed GP rate at 3.44% and the tribunal adopted GP rate of 3.50% in that year. Going by these facts and the basis adopted by the Tribunal in that year that when the turnover goes up, GP rate goes down slightly. Thus we feel it proper to adopt GP rate of 3.84% being average of GP rate declared by the assessee at 3.73% and GP rate of 3.95% after considering the addition made by the AO. - Decided partly in favour of assessee.

Summary

Issues:
Appeal against CIT(A) order for AY 2010-11; Ground raised on purchases from M/s. Shreejee Commercial Corporation treated as bogus expenditure.

Analysis:
The appeal was filed against the CIT(A) order for the assessment year 2010-11. The assessee raised multiple grounds, but during the appeal hearing, the AR requested to decide on the merit of one ground while rejecting the others. Ground No. 6 specifically challenged the addition of ?3,71,263 as non-genuine expenditure from purchases made from M/s. Shreejee Commercial Corporation under section 69C of the Income Tax Act, 1961.

Regarding Ground No. 6, the AR referred to a previous tribunal decision in the assessee's case for AY 2011-12, where it was noted that the GP percentage had varied over different assessment years. The tribunal had accepted a GP rate of 3.50% for a specific year with higher turnover. The bench in the present case observed the turnover difference and concluded that a higher GP rate should be adopted compared to the previous year's rate of 3.50%.

In response, the AR requested the bench to determine the GP percentage for the current year. The Revenue's representative supported the CIT(A)'s order. The tribunal considered the turnover and GP rates from previous assessment years, noting that as turnover increased, the GP rate slightly decreased. Based on this analysis and previous tribunal decisions, the tribunal decided to adopt a GP rate of 3.84%, calculated as an average of the declared GP rates by the assessee and the adjusted rate after the AO's addition.

Consequently, the appeal was partly allowed, and the tribunal pronounced the order on February 1, 2019.