TaxTMI 
TaxTMI 
2026 (5) TMI 844
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....gal and bad in law. 2. For that the Ld. CIT(A) erred in applying the gross profit rate of 15% on disputed purchases of Rs. 9,95,17,275/-. 3. For that even otherwise, considering the nature of business, the Gross Profit rate is arbitrary and excessive. 4. For that the Ld. CIT(A) erred in applying the rate of 15% on disputed purchase whereas he himself admitted the fact that the assessee adduced credible evidences in support of the same and no defect were found therein. 5. For that even otherwise, the Ld. CIT(A) as well as Ld. AO having accepted the sales erred in disputing the genuineness of the purchase. 6. For that apparently, the addition is made merely based on surmises and conjectures merely disbelieving the evidences adduced by the assessee and without bringing any adverse materials on records. 7. For that the Ld. CIT(A) erred in applying the rate of 15% ignoring the fact that the gross profit rate in subsequent year/(s) is 3% to 4% approx. 8. For that the order of the AO be modified and the assessee be given relief prayed for. 9. For that the appellant craves leave to add, alter or withdraw any ground/s o....
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....ection 148A(d) on 07.04.2022 treating it as a fit case for reopening. 5. During the reassessment proceedings, the assessee furnished documentary evidences to substantiate the genuineness of purchases, including GST portal details evidencing existence of suppliers, ledger accounts, confirmations, tax invoices, lorry receipts, GST declarations, bank statements reflecting payments, stock registers demonstrating quantitative movement of goods, and corresponding sales invoices along with realization of sale proceeds. However, the Assessing Officer rejected the explanation and held that the purchases were fictitious as per the detailed findings of the investigation reports. Accordingly, the Assessing Officer treated the entire purchases of Rs.9,95,17,275/- as unexplained expenditure under section 69C of the Act and taxed the same under section 115BBE of the Act 6. In appeal, the assessee challenged both the validity of reopening and the addition on merits. The CIT(Appeals), after examining the record, upheld the reopening by holding that the Assessing Officer had valid "reason to believe" based on information received from the Investigation Wing that the assessee had entered into t....
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.... and at best the profit element embedded in such purchases can be brought to tax. Further CIT(Appeals) placed reliance on Oopal Diamond v. ACIT [(2022) 144 taxmann.com 184 (Mumbai - Trib.)], wherein it was held that in cases of purchases from tainted dealers, only the profit element embedded in such transactions is liable to be added. 9. The CIT(Appeals) held that the case was not one of completely bogus purchases but rather one of possible inflation or routing of purchases through accommodation entry providers. The CIT(Appeals) held that since the quantitative tally was not disturbed and the business activity was evidenced by corresponding sales, the entire addition under section 69C was not justified. At the same time, considering the abnormal fall in gross profit ratio during the year under consideration as compared to the preceding year, the CIT(A) inferred that there could be some element of profit suppression. Accordingly, following the settled legal position and judicial precedents including decisions of the jurisdictional High Court in PCIT v. Surya Impex [(2023) 148 taxmann.com 154 (Guj.)] and PCIT v. Rakesh Kailashchand Jain [(2023) 156 taxmann.com 82 (Guj.)], the CIT(....
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....tutory requirement under section 151 of the Act, as applicable to the relevant assessment year, stands duly complied with. It is well settled that when the notice itself records the factum of approval along with reference number and date, the presumption of validity attaches to such administrative action unless rebutted by cogent evidence, which is absent in the present case. 16. Coming to the issue of limitation, we note that the relevant assessment year under consideration is AY 2018-19. As per section 149(1)(a) of the Act, as amended by the Finance Act, 2021, notice under section 148 can be issued within a period of three years from the end of the relevant assessment year, i.e., up to 31.03.2022. In the present case, the notice under section 148A(b) has been issued on or before 15.03.2022 and the prior approval has been granted on 14.03.2022, both of which fall well within the prescribed limitation period. In view of the above factual and legal position, we hold that the reassessment proceedings have been validly initiated within the prescribed time limit and in accordance with the statutory provisions. The objection raised by the assessee regarding absence of approval is fac....
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.... While it is correct that the assessee has maintained books of account and quantitative records, the mere existence of such records does not ipso facto validate the genuineness of purchases when serious doubts arise regarding the identity and capacity of the suppliers. The Hon'ble Courts have consistently held that when the suppliers are found to be entry operators or non-genuine entities, the burden lies heavily on the assessee to establish actual receipt of goods through credible and independent evidence, which in the present case has not been satisfactorily discharged. 23. The CIT(Appeals), in granting relief by restricting the addition to 15%, has primarily proceeded on the premise that sales have been accepted and that quantitative records were not disturbed. However, in our view, such an approach, though supported by certain precedents, cannot be applied in a mechanical manner without first conclusively establishing that goods corresponding to the impugned purchases had actually been received. The acceptance of sales, by itself, does not automatically validate the source of purchases, particularly where there is material to suggest that the purchases may have been routed t....