2024 (5) TMI 53 - AT - Income Tax

Estimation of income - bogus purchases - HELD THAT - As held in case of Mohmd. Haji Adam company (s 2019 (2) TMI 1632 - BOMBAY HIGH COURT where sales are not disputed no discrepancy between purchases shown by the assessee and the sales declared; only the addition should be restricted to the extent of bringing the gross profit on purchases at the same rate of other genuine purchases. On this mandate it was found that assessee has given the quantitative sales corresponding to the quantitative purchase which is from alleged bogus suppliers. The resultant gross profit from alleged bogus purchase and sales is 5.096%. The gross profit ratio without alleged bogus purchase and corresponding sales is 5.407% which will result into addition of 0.3% of alleged bogus purchases of 1, 15, 86, 557/-which would be minuscule. Looking at the minuscule amount of addition to be retained we find it a reasonable and just to delete the addition and allow appeal of the assessee.

Summary

Issues involved:
The judgment involves the addition of non-genuine purchases under Section 68 of the Income-tax Act, 1961.

Comprehensive Details:

1. Background and Assessment:
The appellant, an individual proprietor of engineer tube traders, filed an appeal against the assessment order under Section 143(3) read with section 147 of the Income-tax Act, 1961. The only issue in the appeal was the addition of non-genuine purchases amounting to &8377;1,15,86,557/-.

2. Assessment Proceedings:
The notice under Section 148 was issued after recording reasons, and it was found that the purchases from two parties were considered non-genuine. Despite the assessee's submissions and evidence of banking transactions and proper bills, the Assessing Officer made a 100% addition of the non-genuine purchases to the total income.

3. Appeal to CIT (A) and Grounds:
The assessee's appeal before the CIT (A) was dismissed, with the addition being confirmed at 100%. The appellant then appealed, submitting stock registers, sales details, and relying on judicial precedents to support the case.

4. Judgment and Decision:
After considering all contentions and evidence, the Tribunal found that the appellant had shown a gross profit ratio similar to genuine purchases even with the alleged bogus transactions. Following the precedent set by the Bombay High Court, the Tribunal concluded that the addition should be restricted to maintain the gross profit rate on the alleged bogus purchases. As the addition was deemed minuscule and reasonable, the Tribunal allowed the appeal of the assessee.

5. Result:
The appeal filed by the assessee was allowed, and the addition of non-genuine purchases was deleted.