TaxTMI 
TaxTMI 
2026 (7) TMI 1983
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....laced before us is dated 13.03.2025 and has been passed under section 147 read with sections 144 and 144B of the Act. We have proceeded on the basis of the assessment order dated 13.03.2025 forming part of the appeal records. Facts of the Case 3. The assessee is an individual and is stated to be engaged in the business of ferrous and non-ferrous metals, including casting of metals and job work. For the assessment year under consideration, the assessee filed his original return of income on 12.02.2021 declaring total income of Rs. 44,89,350/-. 4. The case was reopened on the basis of information received through the Insight Portal that the assessee had obtained accommodation entries in the guise of purchases amounting to Rs. 3,02,21,433/- from M/s Bristal Tube Industries, which was alleged to be engaged in issuing bogus invoices without actual supply of goods. Notice under section 148A(b) was issued and, thereafter, an order under section 148A(d) was passed on 23.03.2024. Notice under section 148 was also issued. 5. During the reassessment proceedings, the assessee furnished invoices, delivery challans, bank statements, stock records and the ledger account of M/s Bristal....
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....he business of trading in ferrous and non-ferrous metals. The assessment had been reopened on the basis of information alleging that the assessee had made purchases amounting to Rs. 3,02,21,433/- from M/s Bristal Tube Industries, which was alleged to be a non-genuine concern. It was submitted that during the course of the assessment proceedings, the assessee had duly discharged the onus cast upon him by furnishing complete documentary evidence in support of the impugned purchases, including copies of purchase invoices and delivery challans, ledger confirmation from the supplier, affidavit of the supplier confirming the transactions, bank statements evidencing payment through banking channels, corresponding sales reflecting consumption of the goods, stock register evidencing inward and outward movement of goods and GST details of both the assessee and the supplier. 10. The learned AR further submitted that the Assessing Officer had accepted the sales effected by the assessee and had not rejected the books of account or the quantitative records maintained by the assessee. It was contended that no material had been brought on record to establish that the purchases were fictitious o....
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....nces of the case the 2% disallowance out of the bogus purchases meets the end of justice. Accordingly, I direct that disallowance be restricted @ 2% of the bogus purchase." 15. The learned AR also relied upon the decision in Kishorkumar M. Vyas v. ITO, ITA Nos. 2683 to 2686/Mum/2019, order dated 06.07.2021, wherein the assessee's were traders in iron and steel and allied products. In that case, the Co-ordinate Bench took note of the low profit margin prevalent in the ferrous-metal trade and followed the decision in Sterling Steel Industries. The relevant findings read as under: "As regards the merits of the issue, it is borne out from record that the doubt, if any, is only with regard to the source of purchases and not the purchases." 16. The Co-ordinate Bench further held: "Considering the nature of business of both the assessee's and keeping in view the decision of co-ordinate bench in case of M/s Sterling Steel Industries (supra), I am of the view that disallowance @2% on the alleged non genuine purchases would be fair and reasonable. Accordingly, I direct the assessing officer to compute the disallowance at 2% on the alleged non genuine purchases in all ....
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....ted the same method and the assessee has accepted the finding. The principle of consistency therefore applies." 20. The learned DR accordingly submitted that the estimation of profit at 12.5 per cent was fair and reasonable and was also consistent with the approach stated to have been adopted in the assessee's own case for the assessment year 2012-13. He therefore prayed that the order of the learned CIT(A) be upheld and the grounds raised by the assessee be dismissed. 21. We have considered the rival submissions and perused the material placed on record. The limited controversy requiring adjudication is the appropriate rate of profit to be estimated in respect of the purchases of Rs. 3,02,21,433/- made from M/s Bristal Tube Industries. The Assessing Officer estimated the profit element at 12.5 per cent and made an addition of Rs. 37,77,679/-, which was confirmed by the learned CIT(A). 22. It is not in dispute that the assessee had furnished purchase invoices, delivery challans, ledger confirmation, an affidavit of the supplier, bank statements evidencing payments through banking channels, stock records and details of the corresponding sales. The Assessing Officer has neit....
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....ible rate. It recognises the principle that, where purchases are made from unverified sources but corresponding sales are accepted, only the profit element embedded in such purchases is liable to be brought to tax. The precise rate remains a matter of estimation based upon the facts of each case. 28. Similarly, the decision of the Hon'ble jurisdictional High Court in Mohommad Haji Adam & Co. supports the proposition that the addition should be confined to the profit element attributable to the disputed purchases. The said decision does not support the proposition that the rate must necessarily be fixed at 12.5 per cent regardless of the assessee's line of business and disclosed profit margins. 29. As regards the appellate order in the assessee's own case for the assessment year 2012-13, the learned CIT(A) observed that a rate of 12.5 per cent had been adopted in that year and had been accepted by the assessee. However, the mere acceptance of an addition in an earlier year does not result in a binding rule that the same rate must be mechanically applied in every succeeding year. The principle of consistency applies where the material facts and circumstances remain identical. I....