ITAT Adjusts Profit Estimate on Bogus Purchases; AO to Recalculate Addition for Assessment Year 2009-10.

The ITAT partially allowed the appeal concerning bogus purchases for the Assessment Year 2009-10. The AO initially added Rs. 12,95,407 to the assessee's income, estimating a 10% profit on non-genuine purchases. The Tribunal, however, found a 5% profit estimation reasonable, directing the AO to adjust the addition accordingly.

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Issues involved: Addition on account of bogus purchases.

The only issue in this appeal is the addition made of ` 12,95,407 on account of bogus purchases for the Assessment Year 2009-10.

Facts:
- The assessee, engaged in trading chemicals, filed a return of income declaring total income of ` 4,38,100 for the year.
- The Assessing Officer reopened the assessment under section 147 of the Income Tax Act based on information received regarding certain purchases claimed by the assessee.
- The Assessing Officer found that purchases of ` 1,29,54,067 claimed by the assessee were not genuine.
- The assessee failed to provide authentic evidence to prove the genuineness of the purchases.
- Notices issued under section 133 (6) of the Act returned unserved.
- The Assessing Officer estimated profit at 10% of the bogus purchases, amounting to ` 12,95,407, which was added to the income of the assessee.
- The assessee appealed to the Commissioner (Appeals) but the addition was sustained.

Arguments:
- The Authorized Representative argued that the profit rate of 10% was high and excessive, suggesting that profit on the alleged bogus purchases should be estimated at a reasonable rate.
- The Departmental Representative supported the observations of the Assessing Officer and Commissioner (Appeals).

Decision:
- The Appellate Tribunal considered the submissions and facts on record.
- It was noted that the purchases were made from parties identified as hawala operators, but the Assessing Officer did not doubt that purchases were made from other sources.
- The Tribunal deemed that estimating profit at 5% on the alleged bogus purchases would be reasonable.
- The Assessing Officer was directed to restrict the addition to 5% of the bogus purchases.
- The decision was based on the specific facts of the case.
- The appeal was partly allowed, and the order was pronounced on 14.12.2018.

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