2024 (7) TMI 1225 - AT - Income Tax

Estimation of income - Bogus purchases - addition taking 25% of the alleged bogus purchases - HELD THAT - ITAT, Mumbai in assessee s own case for AY 2009-10 2021 (9) TMI 1555 - ITAT MUMBAI wherein profit rate of 4% has been directed to be applied on the alleged bogus purchases. Also, in the decision of Co-ordinate Bench in assessee s own case for Assessment Year 2010-11 2024 (7) TMI 1164 - ITAT MUMBAI dated 18.07.2024 similar direction is given to adopt profit rate of 4%. As in the case of Mohammed Haji Adam Co. 2019 (2) TMI 1632 - BOMBAY HIGH COURT had held to restrict the addition to the extent of bringing the gross profit rate on purchases at the same rate of other genuine purchases. Accordingly, we direct the AO to apply the rate of 4% on the alleged bogus purchases. Accordingly, appeal of the assessee is partly allowed.

Summary

Issues:
- Appeal against order of Ld. CIT(A) regarding addition of alleged bogus purchases
- Application of profit rate on non-genuine purchases

Analysis:
The appeal was filed against the order of the Ld. CIT(A) sustaining the addition of Rs. 53,97,157 made by the Assessing Officer by taking 25% of the alleged bogus purchases of Rs. 2,15,88,627. The assessee contended that the purchases were supported by necessary documentary evidence and should not be considered bogus. The Assessing Officer had re-opened the case under section 147 based on information received regarding hawala purchase entries. The CIT(A) upheld the addition, leading to the appeal before the Tribunal.

The main argument raised by the assessee was that since the sales were not doubted, the purchases should also be considered genuine. The counsel for the assessee referred to a decision of the Hon'ble Jurisdictional High Court of Bombay and previous ITAT judgments in the assessee's case for AY 2009-10 and 2010-11, where a profit rate of 4% was applied on alleged bogus purchases. The assessee argued that the addition should be restricted to maintain consistency with previous judgments.

On the other hand, the Senior DR supported the orders of the lower authorities, highlighting the lack of substantiating evidence provided by the assessee. The Tribunal noted that in previous cases concerning the assessee, a profit rate of 4% was applied on bogus purchases. Additionally, the Hon'ble Jurisdictional High Court of Bombay had directed to restrict the addition by applying the gross profit rate on purchases at the same rate of other genuine purchases. Therefore, the Tribunal directed the Assessing Officer to apply a profit rate of 4% on the alleged bogus purchases, partially allowing the appeal of the assessee.

In conclusion, the Tribunal partially allowed the appeal, directing the Assessing Officer to apply a profit rate of 4% on the alleged bogus purchases, in line with previous judgments and the directive of the Hon'ble Jurisdictional High Court of Bombay.