Tribunal limits addition to 7% of alleged bogus purchase amount, citing lack of seller response.

The Tribunal partially allowed the appeal by directing the Assessing Officer to restrict the addition to 7% of the alleged bogus purchase amount of Rs.30,00,000, based on the average profit margin of the assessee. This decision was made considering that the books of accounts were not rejected, the purchases were reflected in the sales tax return, and the lack of response from the seller, indicating a possibility of profit suppression.

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Issues involved:
The issues involved in the judgment are related to additional grounds raised by the assessee regarding treatment of bogus purchases as undisclosed income, the genuineness of purchases from a specific entity, and the assessment of profit margin embedded in the disputed purchases.

Additional Grounds Raised by Assessee:
The assessee raised additional grounds related to the treatment of sales amount, quantitative details of stock, and purchases, as well as the acceptance of sales by the Assessing Officer. The Tribunal admitted these additional grounds for adjudication without requiring fresh investigation into facts.

Assessment of Bogus Purchases:
The assessee, a resident corporate entity involved in trading chemicals, declared income for the relevant year. The Assessing Officer reopened the assessment due to information about bogus purchases worth Rs.30,00,000 from a specific entity. Despite efforts to verify the purchases, including issuing summons and notices, the genuineness of the purchases could not be established. The Assessing Officer treated the entire amount as unexplained investment and added it back to the assessee's income, a decision upheld by the Commissioner (Appeals).

Arguments and Decision:
The assessee contended that all transactions were recorded in the books of accounts and disclosed in tax returns. The assessee argued that only the profit element embedded in the disputed purchases should be considered for addition, not the entire amount. The Tribunal observed that the books of accounts were not rejected, and the purchases were reflected in the sales tax return. Considering the lack of response from the seller and the possibility of suppressing profits, the Tribunal directed the Assessing Officer to restrict the addition to 7% of the alleged bogus purchase amount of Rs.30,00,000, based on the average profit margin of the assessee. As a result, the appeal was partly allowed.

Separate Judgement:
No separate judgment was delivered by the judges in this case.

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