2024 (5) TMI 811 - AT - Income Tax

Estimation of profit - Validity of order of CIT(A) in reducing the gross profit @ 7.89% as against the 100% addition made by the AO - Bogus purchases - non genuine parties to cover-up the purchases from grey market - addition u/s 69C - CIT(A), has erred in reducing gross profit @ 7.89% as against the 100% addition made by the AO - HELD THAT - As in assessee's own case for assessment year 2007 08. 2019 (6) TMI 1722 - ITAT MUMBAI and thereafter, determined that only the balance profit which was disclosed by the assessee in genuine trade and non genuine trade could be added to the total income of the assessee. The coordinate Bench in the appellate order found that gross profit of non genuine purchases 7.64% whereas the gross profit of the assessee from other purchases is 7.89%, and therefore, the difference of 0.25% was added to the total income of the assessee. Therefore, the issue has been decided on the merits of the case in the appeal of the assessee arising out of the same appellate order. Appeal filed by the AO is dismissed.

Summary

Issues Involved:
The judgment involves the appeal filed by the Deputy Commissioner of Income Tax Circle 19 (1), Mumbai against the appellate order passed by the National Faceless Appeal Centre for assessment year 2012-13.

Grounds of Appeal:
The assessing officer raised multiple grounds of appeal questioning the reduction of gross profit in comparison to the addition made on account of bogus purchases. The grounds highlighted the failure to prove the genuineness of purchase transactions, the disallowance of purchases from bogus suppliers, and the reliance on unilateral acts of the assessee without sufficient evidence.

Brief Facts:
The case involves an assessee engaged in trading and manufacturing diamonds, where search and survey actions revealed accommodation entries provided to the assessee by various dealers. The assessing officer considered purchases as bogus to cover-up transactions from the grey market, leading to an addition under section 69C of the Act.

Appellate Proceedings:
The assessee appealed to the CIT - A, who restricted the addition based on the gross profit rate. The coordinate bench upheld the addition to the extent of the difference in gross profit between genuine and non-genuine trading, considering the percentage difference in profits declared by the assessee.

Decision and Rationale:
The coordinate bench dismissed the appeal filed by the assessing officer, citing previous decisions and the difference in gross profit rates between genuine and non-genuine purchases. The decision was based on the merits of the case and the element of profit, following the precedent set by the Bombay High Court and previous rulings in the assessee's case.

Conclusion:
The appeal filed by the assessing officer was dismissed, affirming the addition based on the difference in gross profit rates. The judgment was pronounced on 13.05.2024 in an open court session.