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2024 (10) TMI 1476 - AT - Income TaxEstimation of income - bogus purchases - AO has only estimated the profit from the alleged bogus purchases @ 12.50% - contention of the assessee that it has furnished the details relating to purchases, payments made to the supplier, confirmation from the supplier and also the details of sale of products to various persons - HELD THAT - The assessee herein has furnished all details evidencing the purchases, confirmation from the suppliers, the details of sales made out of those purchases. There is no evidence to show that the money given towards purchases was flown back to the assessee. AO has accepted the sales. Accordingly, we are of the view that the impugned addition cannot be sustained, in the facts and circumstances of the case. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition relating to alleged bogus purchases. Appeal filed by the assessee is allowed.
Issues:
Challenge to addition of Gross profit on alleged bogus purchases. Detailed Analysis: The appeal was filed by the assessee against the order passed by the Ld CIT(A), NFAC, Delhi, related to the assessment year 2012-13, contesting the addition of Gross profit on alleged bogus purchases. The original assessment was completed by the AO on 27.12.2015, but was later reopened due to information received regarding accommodation sales bills issued by M/s PEL Industries Ltd without supplying materials, with the assessee being one of the beneficiaries. The AO proposed to add the profit that could have been generated from these purchases, estimating it at 12.50% based on a decision by the Hon'ble Gujarat High Court in a similar case. The Ld CIT(A) upheld this addition. The assessee contended that all details regarding the purchases from the concerned party were provided, including the purchase of Aluminium products, supported by a Stock register showing receipt and sale of materials. The Ld A.R argued that the AO solely relied on a report from the investigation wing and disregarded the evidence provided by the assessee. It was highlighted that there was no proof that payments for purchases were received back in cash by the assessee. The Ld A.R emphasized that since the purchases and sales recorded by the assessee were accepted, there was no justification for adding additional gross profit. During the proceedings, the AO only estimated the profit from the alleged bogus purchases at 12.50%, indicating no doubt regarding the receipt and sale of materials. The assessing officer did not find fault with the documents provided by the assessee, except for the absence of a stock register for all products dealt with. The Tribunal observed that the stock details for the relevant section (Aluminium) sufficed for the assessment. The Tribunal referred to a decision by the Hon'ble Supreme Court in a similar case, where the addition related to alleged bogus purchases was deleted based on the presence of supporting bills, payments via Account Payee cheques, and confirmation of transactions by the supplier. Drawing parallels, the Tribunal found that the facts in the present case mirrored those in the Supreme Court decision, with all necessary details provided by the assessee and no evidence of funds being cycled back. Consequently, the Tribunal concluded that the addition of Gross profit on alleged bogus purchases could not be upheld and directed the AO to delete the addition. In conclusion, the Tribunal allowed the appeal filed by the assessee, setting aside the Ld CIT(A)'s order on the issue of alleged bogus purchases and directing the deletion of the addition.
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