TaxTMI 
TaxTMI 
2024 (11) TMI 243
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....ing the additions by ignoring the genuineness of purchases and considering it as bogus transaction. 3. That the Ld. AO has erred in law and on facts in making the Addition based on the statement of a third person recorded by another person/officer. 4. Without prejudice, the Ld. CIT (A) has erred in appreciating the fact that the profit percentage assessed by the CIT(A) as GP margin on the alleged bogus purchase is already declared by the assessee in his ITR." 3. None appeared for the Assessee. Even after service of notices except filing the adjournment application on an earlier occasion, neither the Assessee nor the representative of the Assessee have appeared before the Tribunal though a Power of Attorney executed by the Assessee foun....
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.... 6. The Ld. Departmental Representative relying on the orders of the Lower Authorities submitted that the Appeal of the Assessee is devoid of merit which requires no interference at the hands of the Tribunal, thus sought for dismissal of the Appeal. 7. We have heard the Ld. Departmental Representative and perused the material available on record. The Ld. CIT(A) while deciding the Appeal of the Assessee held as under: - "Ground 1 to 5 The Learned AO has carried out addition of Rs. 5.44Crore on accounts of bogus purchases made from two parties and Rs. 1.38 crores by disallowing payment made to such parties. In this regard the appellant has raised multiple ground of appeal which are disposed off collectively as under: 6.2 Based on info....
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....e in books of accounts cannot be ruled out. 6.6 However, if the entire purchases are disallowed, the corresponding sales also need to be ignored but the AO has not done so. There, this leaves with unjustified adjustment in case of the appellant. 6.7 Many high courts and tribunals have dealt with this issue of bogus purchases in greater details and have upheld that certain gross profit shall be added to total income instead of adding entire purchases (especially when corresponding sales are not challenged). 6.8 There is plethora of judicial precedents on this very issue and I have placed reliance on following cases: The Hon'ble Gujarat High Court in the case of Commissioner of Income-tax vs. Simit P. Sheth reported in [2013] 38 t....
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....nly question that survives is what should be the fair profit rate out of the bogus purchases which should be added back to the income of the assessee. The Commissioner adopted the ratio of 30 per cent of such total sales. The Tribunal, however, scaled down to 12.5 per cent. We may notice that in the immediately preceding year to the assessment year under consideration the assessee had declared the gross profit at 3.56 per cent of the total turnover. If the yardstick of 30 per cent, as adopted by the Commissioner (Appeals), is accepted the gross profit rate will be much higher. In essence, the Tribunal only estimated the possible profit out of purchases made through non-genuine parties. No question of law in such estimation would arise. The ....
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....arned by it in 5 years. The average GP for such 5 years works out to 16.5%. 6.10 Therefore, it would be justified to restrict addition to the tune of certain gross profit. Considering totality of the case and relying on jurisdictional High Court's judgment and various other judicial pronouncements by Honourable High courts and ITATS, I am of the view that the addition shall be restricted to 16.5% of amount disallowed by AO as an additional taxable income, without giving any benefit of expenses towards the same. It would be appropriate to apply this cross-profit ratio of 16.5 percent on both i.e., amount of purchases and payment made to these parties. 6.11 In view of the above total addition to income of the appellant amounts to Rs....