Tribunal Reduces Profit Rate on Bogus Purchases from 100% to 4%, Citing Non-Service of Notices and Trade Nature.

The ITAT partly allowed the appeal, setting aside the CIT(A)'s order and directing the AO to apply a 4% profit rate on the bogus purchases instead of the initial 100% addition. The Tribunal found merit in the assessee's claim regarding non-service of notices and considered the trade nature and GP rate.

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Issues: Appeal against addition of bogus purchases by AO and confirmation by CIT(A) for assessment year 2009-10.

Analysis:
1. Background: The assessee filed a return declaring income, which was later reopened by the AO due to information about hawala purchase entries. The AO treated purchases as non-genuine, adding Rs.94,04,277 to the income.

2. AO's Decision: The AO framed an ex-parte assessment, adding 100% of the bogus purchases to the income. The CIT(A) upheld this decision, rejecting the evidences provided by the assessee, emphasizing non-response to notices.

3. Appellate Tribunal's Decision: After hearing arguments, the Tribunal found merit in the assessee's claim that notices were not served. Considering the trade nature and GP rate, a profit rate of 4% was deemed reasonable based on facts, arguments, and precedents from similar cases.

4. Conclusion: The Tribunal partly allowed the appeal, setting aside the CIT(A)'s order and directing the AO to apply a 4% profit rate on the bogus purchases, differing from the initial 100% addition. The decision was pronounced in the open court on 17.09.2021.

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