TaxTMI 
TaxTMI 
2026 (9) TMI 249
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.... the accompanying Cross Objection bearing CO No. 192/Mum/2026 arising out of the same appellate order. Since the Revenue's appeal and the Cross Objection arise from the same set of facts and the same appellate order, they were heard together and are being disposed of by this consolidated order. 2. The Revenue, in its appeal, is principally aggrieved by the decision of the learned CIT(A) in restricting the addition made on account of alleged bogus purchases from Rs.34,03,964 to Rs.4,25,496, being 12.5% of such purchases. The assessee, in its Cross Objection, has raised four grounds. Grounds Nos. 1 and 2 challenge the validity of the notice issued under section 148 and the consequential assessment framed under section 143(3) read with sect....
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.... books of account under section 145(3) and disallowed the entire amount of Rs.34,03,964. 4. In the first appeal, the learned CIT(A) upheld the reopening of the assessment as well as the rejection of the books of account. On the quantum of addition, however, he observed that the manufacturing activity carried on by the assessee was not in dispute; the corresponding sales had been accepted; and the quantitative details relating to raw materials consumed and finished goods manufactured broadly reconciled. Thus, while the assessee had failed to establish conclusively that the impugned purchases were actually made from the stated supplier, the underlying procurement and utilisation of the goods could not altogether be discarded. Applying the ....
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....the assessment order and the findings recorded in the impugned appellate order. There is no dispute that the assessee could not establish, through reliable and independently verifiable material, that the purchases were actually made from M/s Vijay Barrel Co. The absence of a separate stock register for second-hand barrels, the inability to produce the supplier and the adverse information received from the Sales Tax Department certainly impaired the evidentiary worth of the purchase invoices. These circumstances justified the rejection of the books of account in relation to the disputed purchases and called for a reasonable estimation of the income which might have escaped assessment. However, the failure to establish the purchases from the ....
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....decision of the Hon'ble Supreme Court in N.K. Proteins Ltd. That decision, however, cannot be understood as laying down an inflexible proposition that every case involving an unverified supplier must necessarily result in disallowance of the entire purchase amount, irrespective of the nature of the business, acceptance of the corresponding sales and the surrounding evidence. The extent of addition has to be determined on the factual substratum of each case. Here, the accepted sales and the subsisting manufacturing activity materially distinguish the matter from one where both the purchases and the corresponding movement or utilisation of goods are found to be wholly fictitious. In this factual setting, the principle recognised in CIT v. Sim....
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....g to the Cross Objection filed by the assessee, Grounds Nos. 3 and 4 challenge the rejection of the books of account under section 145(3) and the sustenance of the addition of Rs.4,25,496. For the reasons already discussed while adjudicating the Revenue's appeal, the purchases from the stated supplier remained unverifiable and the estimation of the profit element at 12.5% is fair and reasonable on the peculiar facts of the case. We, therefore, do not find any substance in the assessee's challenge either to the rejection of the books in relation to the disputed purchases or to the addition sustained by the learned CIT(A). Grounds Nos. 3 and 4 of the Cross Objection are accordingly dismissed. 11. Insofar as Grounds Nos. 1 and 2 of the Cros....