TaxTMI 
TaxTMI 
2025 (7) TMI 1165
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....ny to verify the genuineness and correctness 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....
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.... course of business and audited as per the provisions of the section 44AB of the Income 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 all....
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....e books maintained and audited u/s 145 solely based on non-compliance u/s 133(6) of the Income Tax Act. The appellant has failed to prove the genuineness or creditworthiness of the parties 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(....
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....014] 51 taxmann.com 514/[2015] 67 SOT 0052 (Mumbai) in which case the Assessing Officer disallowed the entire expenditure incurred by the assessee on purchases as it was one of the beneficiaries of bogus hawala bills, 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. 51....
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....refer-Clarity Gold (P.) Ltd. v. Pro CIT [2019] 102 taxmann.com 421 (Raj.)]. 5.12.2 The assessee, trading in paper and paper products, found indulging in hawala business without actual transaction. The AD disallowed entire purchases of Rs. 4.17 Crores u/s. 69C. The CIT(A) applied GP rate of 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- Madhukan....
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....the fact that after rejection of books of accounts, there was no option but to estimate the profit of the business and accordingly, the profit of the business was estimated @ 25% of the total turnover wherein the assessee had declared the turnover of Rs. 18,22,42,977/- and by applying the rate of NP of 25% of the total turnover, the net 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 rejec....
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....of the assessee submitted as under :- "A. The AO alleged that the assessee made substantial purchases from multiple parties who are Either did not file Income Tax Returns (ITRs) for A.Y. 2021-22, Filed non-business ITRs, or Reported a much lower turnover in their ITRs compared to their GSTR-1 returns. * The allegation of the assessing officer that assessee has made purchases from those suppliers who are 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 ....
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....ts); * Bank payment proofs, evidencing payments through NEFT/RTGS; * Ledger confirmations and supplier-wise purchase registers; * GSTR-2A data, confirming the input tax credit and supplier filings. Once such documentation is placed on record, the initial burden of proof cast upon the assessee under general principles of taxation stands discharged. * In support of the above facts and contentions, assessee placed reliance on the judgement of HON'BLE SUPREME COURT PASSED IN THE CASE OF ORISSA CORPORATION PVT. LTD. V. CIT, (1986) 159 ITR 78 (SC)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 th....
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.... various courts: * THE COMMISSIONER OF INCOME TAX-I VERSUS M/S NIKUNJ EXIMP ENTERPRISES PVT LTD, 2013 (1) TMI 88, BOMBAY HIGH COURT * CONTINENTAL CARBON INDIA LTD VERSUS ITO DELHI, 2011,ITAT DELHI * ASSTT COMMISSIONER OF INCOME TAX VERSUS VS M_S SWASTIK ROADLINES PVT LTD, 2013 (8) TMI 108, ITAT AGRA * OFFICE OF THE ITO- 31 (1) (5) MUMBAI VERSUS M_S GOLD FINGER, 2018 (5) TMI 1319, ITAT MUMBAI * Accordingly, in line with the above ruling, the mere non-availability or non-verification of suppliers in the instant case does not, by itself, establish that the purchases were bogus, especially when 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 Aud....
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....intained in the normal course of business, - Duly audited under Section 44AB by an independent chartered accountant, * In the present case, the Assessing Officer (AO) rejected the books of account of the assessee without pointing out any specific defects and proceeded to make an arbitrary addition. It is a well-settled principle of law that even after rejecting the books, the AO cannot make an addition without a reasonable and justifiable basis. The estimation of profit must be grounded in past profit trends, comparable cases, and industry standards, rather than an ad-hoc percentage. Several judicial precedents, emphasize that once books of account are regularly maintained, audited, and supported by documentary evidence, their rejection must be backed by cogent reasoning. Mere suspicion or general observations cannot justify an arbitrary addition. Reliance has been 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, CENTRA....
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....METAL WORKS, C/O SARKAR & ASSOCIATES VERSUS ITO, WARD-32 (2), NEW DELHI In this case also, information was received from the Investigation Wing which was based on information forwarded by Maharashtra VAT Department that the assessee has availed Hawala entry of bogus bill purchases in the financial year 2010-11 based on this information, reopening has been done u/s. 148.Again, it is not the case of the assessee. * HIGH COURT OF RAJASTHAN Clarity Gold (P.) Ltd.v.Principal Commissioner of Income-tax, Central Circle-1, Jaipur, [2019] 102 taxmann.com 421 (Rajasthan) As mentioned by the CIT(A) in para 5.12.1 at Pg 24 of its order it was admitted by the owners, who were doing business in semi-precious stones, that turnover was bogus and was enhanced for obtaining higher bank finance. In this judgement also there is admission by owner itself, therefore this judgement is also not applicable in the present case of the assessee. * POOJA PAPER TRADING CO. PVT. LTD. VERSUS INCOME TAX 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 o....
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.... It can thus be seen that the appellate authority as well as the Tribunal came to concurrent conclusion that the purchases already made by the assessee from Raj Impex were duly supported by bills and payments were made by Account Payee cheque. Raj Impacts also confirmed the transactions. There was no evidence to show that the amount was recycled back to the assessee. Particularly, when it was found that the assessee the trader had also shown sales out of purchases made from Raj Impex which were also accepted by the Revenue, no question of law arises. * ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-2, GHAZIABAD AND OTHERS VERSUS VIJAY KUMAR GOEL AND OTHERS 2015 (6) TMI 763 - ITAT DELHI ITA No. 670/Del/2013 16. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it appears that the AO made the addition merely on the basis of statement of one Sh. Surendra Kumar Sharma, Proprietor of M/s Riddhi Siddhi Enterprises which was later on retracted and it was stated that he was not indulged in providing the entries to the assessee or to any other person. The AO did not provide any opportunit....
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.... supplied worth of goods between Rs. 10 lakhs and Rs. 1 crore, they have not filed any return of income and also not responded to the various notices. Accordingly, he treated the above purchases as non-genuine and proceeded to add 25% of the turnover as gross profit earned by the assessee. We observe that after considering the facts available on record, ld. CIT (A) treated the purchases as non-genuine by relying on the turnover of the assessee for AYs 2020-21, 2021-22 and 2022- 23. He observed that the average gross profit declared by the assessee for three years is at 2.52%. He observed that during the year under consideration, the assessee himself has declared GP of 2.46% of the total turnover and observed that assessee has declared net profit of Rs. 13,14,900/- during the year under consideration, by relying on several case laws, he sustained the addition of 2.46% of the gross turnover as net profit as must have earned by the assessee. Since the assessee has declared Rs. 13,14,900/-, he sustained the addition to the extent of Rs. 31,68,277/-. From the facts available on record, we observe that no doubt, the purchases seem to be nongenuine based on the findings of the lower autho....