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2016 (10) TMI 700 - AT - Income TaxGP addition @ 12.5% of the suspected purchases - Held that - Sales account is undisturbed presumption of purchase of goods outside the books and also without bills procuring the purchase bills from the hawala bill providers etc. Undoubtedly the assessee is engaged in the construction activity and GP rate 12.5% is not uncommon. In the cited judgment the addition @ 12.5% of the suspected purchases was confirmed by the Hon ble High Court in the case of CIT vs. Nikunj Eximp Enterprises Pvt 2013 (1) TMI 88 - BOMBAY HIGH COURT when the recorded profit of the assessee Simit P Sheth (supra) is only @ 3.56%. Considering the above we find the CIT (A) is justified in adopting 12.5% of the suspected purchases for addition. Therefore in our opinion the order of the CIT (A) on this issue is fair and reasonable and it does not call for any interference.
Issues involved:
Validity of reopening proceedings under section 147/148 and addition of gross profit on suspected purchases. Analysis: 1. The appeals before the Appellate Tribunal ITAT Mumbai involved cross appeals related to the assessment year 2009-2010, with inter-connected issues. The appeals were clubbed together for convenience and heard jointly. 2. The first appeal was filed by the assessee against the order of the CIT (A)-33, Mumbai, challenging the initiation of proceedings under section 147/148 as illegal and unsustainable, along with disputing the addition of gross profit on suspected purchases. The issues raised by the assessee were related to the validity of the reopening proceedings and the addition of gross profit on certain purchases. 3. The relevant facts of the case included the assessee being a Civil Contractor, a survey conducted under section 133A, information received regarding bogus purchases from specific parties, and subsequent initiation of proceedings under section 147/148 by the Assessing Officer (AO). 4. During the proceedings before the CIT (A), the AO's assessment approach was questioned, leading to the CIT (A) adding additional gross profit on the suspected purchases, which was contested by the assessee. 5. The Tribunal considered the arguments presented by both parties, where the assessee relied on a Gujarat High Court judgment to support the contention that only the profit element embedded in such purchases should be added to the income, not a flat gross profit rate. 6. The Tribunal analyzed the relevant legal precedents and observed that the sales account remained undisturbed, leading to the conclusion that only the profit element from the suspected purchases should be added to the income, as per the cited judgments. 7. Ultimately, the Tribunal upheld the CIT (A)'s decision to adopt a 12.5% gross profit rate on the suspected purchases, considering the nature of the business and the prevailing GP rate of the assessee, dismissing the assessee's appeal. 8. Another appeal was filed by the Revenue challenging the relief granted by the CIT (A) on the bogus purchases issue. However, due to the tax effect falling below a specified threshold, the Tribunal dismissed the Revenue's appeal in accordance with CBDT Circular No.21/2015. 9. In conclusion, both the assessee's and the Revenue's appeals were dismissed by the Tribunal, with the orders pronounced on 30th September 2016.
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