2025 (9) TMI 888 - AT - Income Tax

Appeal partly allowed: bogus purchase additions capped at 5% above taxpayer's reported gross profit after concession

ITAT, MUMBAI - AT partly allowed the appeal, holding that additions for alleged bogus purchases should be restricted to 5% over the gross profit rate ... Estimation of income - bogus purchases - HELD THAT:- Admittedly various Courts in the cases pertaining to the business of ferrous and non-ferrous metal trading, restricted the Gross profit rate ranging from 5% to 12.5% embedded therein under peculiar facts and circumstances of the cases and therefore in the considered opinion of this Court for the just decision of the case and substantial justice, sustaining the addition @ 5% of the alleged bogus purchase over and above already shown by the Assessee, would be fair and reasonable and therefore accordingly conveyed this inclination to the parties. Thus, assessee has candidly admitted that addition @ 5% of the bogus purchases may be upheld. Resultantly the addition sustained by the Ld. Addl/ Commissioner @ 12.5% of the alleged bogus purchases is restricted to the extent of 5% over and above the GP rate already shown. Appeal filed by the Assessee is partly allowed. Information from DGIT (Investigation) and the Sales Tax Department indicated purchases from two suppliers totaling Rs. 90,41,001 (Rs. 29,68,483 and Rs. 60,72,518) suspected to be accommodation entries. The Assessing Officer disallowed these purchases and computed a notional addition of Rs. 11,42,625, applying a GP rate of 12.5% on Rs. 90,41,001. The assessee challenged the addition and relied on coordinate-bench decisions contending that the GP rate observed on genuine purchases should be applied to the disputed purchases. Having considered the factual matrix and precedents in ferrous/non-ferrous metal trading cases, the Tribunal found it reasonable for substantial justice to restrict the addition. The Tribunal reduced the AO's estimation and held that the addition sustained by the lower authority at 12.5% is to be restricted to '5%' of the alleged bogus purchases over and above the GP rate already shown by the assessee. Appeal partly allowed.