Tribunal confirms restriction on addition to gross profit, revenue's appeal dismissed

The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision to restrict the addition made towards gross profit of bogus purchases, considering the peculiar circumstances and the absence of an appeal from the assessee. The revenue's appeal was therefore dismissed.

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Issues:
1. Whether the Commissioner of Income Tax (Appeals) was justified in directing the Income Tax Officer to restrict the addition made towards gross profit of bogus purchases.

Analysis:
The appeal in ITA No.6448/Mum/2018 for A.Y.2009-10 was filed against the order of assessment passed by the Income Tax Officer, Mumbai. The only issue raised was regarding the direction given by the Commissioner of Income Tax (Appeals) to restrict the addition made towards gross profit of bogus purchases. The assessee, engaged in manufacturing and resale of building materials, had filed the return of income for the relevant assessment year, declaring income. The Income Tax Officer observed that the assessee had made purchases from a party listed as tainted by the Maharashtra Sales Tax Department. Consequently, the assessment for the year was reopened. The Income Tax Officer had treated the entire value of purchases as unexplained expenditure under section 69C of the Income Tax Act, 1961. However, the Tribunal held that no addition could be made under section 69C as the expenditure should have been actually incurred but could not be explained by proper source. The Commissioner of Income Tax (Appeals) estimated the addition by restricting the gross profit percentage to 23% on the value of alleged purchases, considering the gross profit declared by the assessee. The Tribunal noted that the adoption of a profit percentage of 23% by the Commissioner of Income Tax (Appeals) was higher than the usual 12.5% adopted by the Tribunal in similar cases. As the assessee did not appeal against this decision, the Tribunal concluded that the Commissioner's order did not require any interference, and hence, dismissed the revenue's appeal.

In conclusion, the Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision to restrict the addition made towards gross profit of bogus purchases, considering the peculiar circumstances and the absence of an appeal from the assessee. The revenue's appeal was therefore dismissed.

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