2021 (8) TMI 275 - AT - Income Tax

Rejection of books of accounts - estimating G.P. on unproved purchases - HELD THAT - Undisputedly, the assessee failed to discharge his onus in proving genuineness of suspicious dealers and purchases made from them. Assessing Officer has rejected the books of assessee and thereafter estimated G.P. on bogus purchases. It would be relevant to mention here that the Assessing Officer while estimating G.P. on unproved purchases has neither disturbed the G.P. declared by the assessee on regular purchases nor sales turnover declared by the assessee. Therefore, no prejudice is caused to the assessee in so far regular/undisputed purchases. The ground No. 3 of appeal is without any merit hence, dismissed. Estimation of income - Bogus purchases - HELD THAT - The assessee has declared over all G.P. of 6.24%. The Assessing Officer has estimated G.P. on bogus purchases at 12.5%. The CIT(A) has upheld the same. In our considered opinion estimation of G.P. at 12.5% is on higher side. To meet the ends of justice suppressed profit margin on bogus purchases is restricted to 7%.

Summary

Issues Involved:
1. Validity of reopening of assessment
2. Rejection of books of account
3. Addition made on estimations in respect of bogus purchases

Validity of Reopening of Assessment:
The appeal challenged the validity of the reopening of assessment for the assessment year 2009-10. The Commissioner of Income Tax (Appeals) upheld the reopening, stating that no contrary material was available on record. The Tribunal found no reason to interfere with the CIT(A)'s findings on this issue, leading to the dismissal of grounds 1 and 2 of the appeal.

Rejection of Books of Account:
The assessee contested the rejection of books of account due to the failure to prove the genuineness of purchases from suspicious dealers. The Assessing Officer rejected the books and estimated the Gross Profit (G.P.) on bogus purchases at 12.5%. However, the G.P. declared by the assessee on regular purchases remained undisturbed. The Tribunal noted that no prejudice was caused to the assessee regarding regular purchases. Consequently, ground 3 of the appeal, challenging the rejection of books of account, was dismissed.

Addition Made on Estimations in Respect of Bogus Purchases:
The appeal also disputed the addition made on estimations concerning bogus purchases. The Assessing Officer estimated the G.P. on bogus purchases at 12.5%, which was upheld by the CIT(A). The Tribunal, considering the ends of justice, restricted the suppressed profit margin on bogus purchases to 7%, finding the estimation of G.P. at 12.5% to be on the higher side. As a result, ground 4 of the appeal was partly allowed.

In conclusion, the Tribunal partially allowed the appeal by the assessee concerning the addition made on estimations in respect of bogus purchases, while dismissing the challenges related to the validity of reopening of assessment and the rejection of books of account. The general grounds 5 and 6 were deemed not to require adjudication.