2025 (4) TMI 1080 - AT - Income Tax

Estimation of income - bogus purchase - applying GP rate of 12.5% - HELD THAT - Assessee has given details of purchases and also the source of purchases were from the books and made through account payee cheques. On similar facts in the original quantum proceedings u/s. 143(3) CIT (A) has applied GP rate of 12.5%. Before this Tribunal in the appeal for A.Y.2011-12 similar matter had come up wherein ld. CIT (A) has restricted the disallowance by applying GP rate of 12.5% on alleged bogus purchases however ld. AO has added the entire bogus purchases in the proceedings u/s.154 while computing book profit. Tribunal had deleted the said addition on book profit stating that it is beyond the scope of u/s.115JB. In any case application of GP rate on bogus purchases has now been upheld in the case of Mohammad Haji Adam Co. 2019 (2) TMI 1632 - BOMBAY HIGH COURT Accordingly appeal filed by the Revenue is dismissed.

Summary

The Appellate Tribunal (ITAT Mumbai) dismissed the Revenue's appeal against the CIT(A)'s order concerning bogus purchases of Rs.16,17,386/- added by the AO under section 143(3) read with section 147 for A.Y. 2011-12. The AO had treated the entire amount as income based on Maharashtra Sales Tax Department information labeling the sellers as "hawala traders." The assessee submitted purchase details and payments via account payee cheques, which the AO rejected.The CIT(A) applied a Gross Profit (GP) rate of 12.5% on the bogus purchases, limiting the addition accordingly. The Tribunal noted that similar facts had been considered previously, and the CIT(A)'s approach was upheld by the Bombay High Court in Mohammad Haji Adam & Co., 103 taxmann.com 459, endorsing the application of GP rate on bogus purchases. The Tribunal held that adding the entire amount as income or in book profits under section 115JB was incorrect.Hence, the Tribunal affirmed the CIT(A)'s order restricting the addition to 12.5% of the bogus purchases and dismissed the Revenue's appeal.