TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1165
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....of business purchases including expenses. Accordingly, notices u/s 143(2) and 142(1) were issued and served on the assessee. Further several notices and opportunities were given to the assessee, however assessee has complied only on two occasions filing part information. During assessment proceedings, AO observed that assessee declared total turnover of Rs. 18,22,42,977/- and claimed purchase expenses of Rs. 17,39,39,757/-. Since the issue under consideration was selected to verify the genuineness and correctness of the expenses claimed by the assessee. Based on the certain information submitted by the assessee, the AO verified the details submitted by the assessee on test check basis to the purchases made by the assessee for the value of more than Rs. 10 lakhs. Further in order to verify the genuineness of the transaction, notice u/s 133(6) was issued to 12 parties and details of the parties are reproduced at page 4 of the assessment order and he collected the details on the basis of GSTR. He observed that none of the parties responded to the notices issued u/s 133(6) of the Act. Further assessee was also issued notice u/s 142(1) of the Act to file the details in respect of purcha....
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.... Tax Act, 1961. Copy of audited financial statement along with form 3CD, Form 10lE and acknowledgement of income tax return is being enclosed herewith as Annexure - 1. * I have no control over the suppliers, however, I am trying to contact all eleven parties for requesting to cooperate with the Income Tax Department. In respect of 133(6) which were not complied by the eleven alleged parties namely Inderjeet, Amit Kumar, Karanjeet Singh, Sumrita, Rahul Bansal, Sunil Sharma, Gobind, Rohtash, Hindustan paper Machinery Industries, Karan Kumar and Rajnandini Metal Limited, I am enclosing following documents to prove the genuineness of purchase as Annexure - 2. * Details of Parties containing Name, Address, PAN, GSTIN and address as available in our records. * Copies of Bills in respect of Purchase made. * Copy of GR I Transport Receipt I Bilty. * Copy of bank statement highlighting the payment made to suppliers. * Copy of Form GSTR 2A reflecting the counter filing status of purchases. * Copy of ledger confirmation of the above alleged parties. 3. After considering the same, the AO rejected the same and proceeded to sustain the addition @ 25% of the total turnover as net....
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....arties either during the assessment proceedings or during the appellate proceedings. The fact remain that none of the 11 parties have filed their ITR as no such detail of ITR has been filed either during the assessment proceeding or appellate proceeding. During the appellate proceeding the appellant has further maintained that out of the 11 alleged parties, the appellant had no transaction with 2 of them. However during the assessment proceeding in the entire reply given before the assessing officer this fact has not been mentioned by the appellant even once. The appellant has in his reply before the assessing officer repeatedly stated that he will try to bring confirmation from all the 11 parties. 5.5 In view of the above findings it is clear that the appellant has indulged in purchase from the parties who had doubtful credentials. The appellant has alleged in his Ground of appeal that "The Learned Assessing Officer (AO) has committed a significant error in issuing the order under section 143(3) and drawing conclusions without sufficient material evidence on record, and without issuing summons under section 131 to the alleged parties or suppliers. It is argued that the AO has im....
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.... as per information available with the Assessing Officer. The CIT (Appeals) held that when sales were accepted, then corresponding purchases could not be disallowed. He held that profit element embedded in the purchases only could be added and not the entire purchase amount and upheld the addition up to 2% of the purchase amount as profit element embedded in purchases and deleted the balance addition. The ITAT, on revenue appeal, in the above case held that the assessee had been declaring gross profit between 5% to 8% and since purchases were made from grey market the corresponding profit element would be higher and estimated further 3% of the purchases amount on traded profit embedded in the purchase amount. The High Court in revenue's appeal declined to interfere in the order of the ITAT and upheld the attribution of 5% profit on such alleged bogus purchase. (Emphasis supplied). 5.9 Furthermore in the case of Belmarks Metal Works v. ITO [IT Appeal No. 5198 (Delhi) of 2018, dated 5-3-2020] where in the Tribunal upheld the addition to the extent of profit 'element embedded in bogus purchases and deleted the balance addition. The Tribunal held that the source of purchases ....
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.... 3.67% on bogus purchases, whereas the Tribunal enhanced the disallowance to 12.5% of bogus purchases. It was held that no substantial question of law arose. [refer- Pooja Paper Trading Co (P.) Ltd. v. ITO [2019] 104 taxmann.com 95/264 Taxman 260 (Bom.); Pro CIT v. Synbiotics Ltd. [2019] 106 taxmann.com 316/265 Taxman 34 (Gujarat) (Mag.) (where GP rate of 25% of bogus purchases was applied)]. 5.12.3 In cases where on the basis of statements of alleged suppliers it was found that no supplies were made to the assessee, it was held that purchases were bogus but on the presentation of quantitative tally of the opening stock, purchases, sales and closing stock, it was further held that "unless some purchases are made there cannot be corresponding sale" and, therefore, application of higher net profit rate of 5%, in a manner similar to section 44AF, could be justified. [refer- Madhukant B. Gandhi v. ITO [IT Appeal No. 1950 (Mum.) of 2009, dated 23-2-2010]]. In CIT v. Premkumar B. Rathi [2015] 59 taxmann.com 203/232 Taxman 638/377 ITR 447 (Guj.), the assessee, who was dealing in edible oils, on semi-whole sale basis, failed to prove the genuineness of purchases of Rs. 2 crores (approx.)....
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....et profit was, arrived at Rs. 4,55,60,744/- as against the Net Profit of Rs. 13,10/411/- declared by the assessee and the same was disallowed and added to the total income of the assessee. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not providing opportunity to Assessing Officer under Rule 46A to give comments/counter the issues raised." "Cross Objections 1. (i) That, on the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and law in upholding the action of the AO in rejecting the books of accounts of the assessee despite the fact that not a single error or mistake has been pointed out in the books of accounts of the assessee. (ii) That, on the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and law in upholding the rejection of the books of accounts in the absence of any evidence of any sales or purchases outside the books of accounts. 2. (i) On the facts and circumstances of the case, the learned CIT(A), NFAC has erred both on facts and in law in confirming the addition of Rs. 31,68,2771- by arbitrary applying the net profit rate of 2.46% on the total turnover. (ii) That, ....
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.... either non-filler or work reported lower turnover. This allegation is without any basis. On the contrary, the assessee has submitted complete details in respect of each of the supplier placed at PB Page 138-349. * The assessing officer as issued notice under section 133(6) and each of the notice had been duly served as there is no allegation that any of the notice has come back unanswered or supplier was not available at the given address. * The assessing officer has made wild allegation without bringing any material to support the allegation. * On the contrary, the assessee has filed GSTR-2A which clearly shows the filing status of the supplier placed at PB Page 162-164. * PAN and GST Registration Establishes Supplier Identity Each of the suppliers had valid PANs issued by the Income Tax Department and GST registrations granted by the concerned tax authorities. These registrations are issued only after proper due diligence and verification by respective departments. Hence, it is incorrect and legally impermissible to question the existence or legitimacy of these suppliers, especially in the absence of any contrary evidence. * Genuineness of Transaction Evidenced by Pr....
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....wherein hon'ble Apex Court held that when the assessee furnishes complete particulars of the transactions and makes payments through proper banking channels, the failure of the recipients to respond to departmental notices cannot be a valid ground to treat the transaction as bogus. Relevant findings are extracted as under: In Sreelekha Banerjee v. CIT [1963] 49 ITR 112, this court held that if there was an entry in the account books of the assessee which showed the receipt of a sum on conversion of high denomination notes tendered for conversion by the assessee himself, it is necessary for the assessee to establish, if asked, what the source of that money was and to prove that it was not income. The Department was not at that stage required to prove anything. It could ask the assessee to produce any books of account or other documents or evidence pertinent to the explanation if one was furnished and examine the evidence and the explanation. If the explanation showed that the receipt was not of an income nature, the Department could not act unreasonably and reject that explanation to hold that it was income. If, however, the evidence was unconvincing, then such rejection could be ....
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....n supported by uncontroverted documentary evidence. C. The AO further alleged that despite being granted multiple opportunities, the assessee failed to provide necessary documents. * The allegation that the assessee failed to provide the necessary documents despite multiple opportunities is factually incorrect and devoid of merit. The assessee fully cooperated during the assessment proceedings and furnished all requisitioned details, including: o Acknowledgement of Income-tax return dated 12.01.2022 - at PB Pg 1 o Audited Financial Statements - at PB Pg 2-6 o List of suppliers along with PAN and GSTN - at PB Pg 24 o Detail of purchases made during the F.Y.2020-21 - at PB Pg 25-39 o Detail of sales made during the F.Y.2020-21 - at PB Pg 40- 57 o Confirmation of Accounts of debtors - at PB Pg 58-63 o Stock register - Quantitative wise detail of stock for F.Y. 2020-21- at PB Pg 64-78 o Details of bank accounts maintained by the assessee - at PB Pg 79 o Bank Statement for period 01.04.2020 to 31.03.2021 * ICICI Bank - at PB Pg 80-125 * Bank reconciliation - at PB Pg 126 * Punjab National Bank - at PB Pg 127-129 o Details of suppliers along with address - a....
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....en placed on the following judgements of various courts: * ITO, WARD 58 (2) NEW DELHI VERSUS NEERAJ KUMAR PROP. M/S NEERAJ METAL AND (VICEVERSA) 2025 (2) TMI 290 - ITAT DELHI * GORJA STEEL PROCESSORS VERSUS DCIT,2024, ITAS NO.2905 TO 2907/DEL/2022 * SUNIL GARG VERSUS DCIT, CENTRAL CIRCLE-II, FARIDABAD HARYANA, 2025 (1) TMI 905 - ITAT DELHI, DATED: - 16-1-2025 * SHRI KAMAL SHARMA VERSUS DCIT, CENTRAL CIRCLE-II, FARIDABAD, 2024 (10) TMI 1628 - ITAT DELHI, DATED.- OCTOBER 24, 2024" 8. Further with regard to cross objections, he submitted as under :- "9. The Ld. CIT(A), while adjudicating the appeal, did not accept the Assessing Officer's estimation of net profit at 25% of turnover, holding that such a high rate was arbitrary and unsupported by industry norms. 10. However, the Ld. CIT(A) was of the view that the assessee had not fully discharged the onus of proving the genuineness of purchases from certain suppliers. 11. Accordingly, the Ld. CIT(A) chose to estimate the gross profit at 2.46% of the declared turnover-based on the assessee's own historical gross profit trend. On applying this rate to the declared turnover of Rs.18.22 crore, the CIT(A) arrived at a gross pr....
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....AX OFFICER-4 (3) (1), MUMBAI -In this judgement assessee found indulge in hawala business without actual transaction as mentioned by CIT(A) in para 5.12.2 at Pg 24 of its order and there is no such allegation in the case of the assessee. * SHRI MADHUKANT B. GANDHI VERSUS THE INCOME TAX OFFICER WARD 25 (1) (3) MUMBAI -It was held in para 5.12.3 at page 25 of CIT(A) order that on the basis of statements of alleged suppliers it was found that no supplies were made to the assessee. In the present case of assessee, facts are different. * COMMISSIONER OF INCOME-TAX-I VERSUS SIMIT P SHETH, 2013 (10) TMI 1028 - GUJARAT HIGH COURT, Dated: - 16-1-2013- In this case, Assessing Officer observed that the purchases were not made by the said three parties, viz., Bhavna Trading Co., M/s. Minaxi Enterprise and Arun Industrial Corporation, but believed that the appellant-assessee had made the purchases from other parties in the open market (other than those mentioned in the books of account). 15. Your honors, in the present case there is absolutely no adverse statement or any adverse report of any investigation in respect of any of the suppliers from whom the assessee has made purchases during....
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....iding the entries to the assessee or to any other person. The AO did not provide any opportunity to the assessee to cross examine Sh. Surendra Kumar Sharma. In the present case, it is also noticed that the turnover of the assessee was accepted by the Trade Tax Department and it is not the case of the AO that proper books of accounts were not maintained by the assessee in regular course of business or the same method of accounting was not followed consistently. The ld. CIT(A) examined the bank accounts as well as books of accounts of the assessee and categorically stated that the purchases as well as the sales were through banking channel and there was no cash deposit in the bank account of the assessee. In the present case, the AO has not pointed out any defects in the books of accounts, therefore, the ld. CIT(A) was fully justified in deleting the addition made by the AO on account of alleged bogus purchases particularly when the GP rate declared by the assessee was progressive and was accepted by the AO. As regards to the additions sustained by the ld. CIT(A) by applying the net profit rate of 5% of the alleged unverifiable purchase. We are of the view that when the ld. CIT(A) hi....