The Bombay High Court has held that the gross profit rate of 5% against 0.69% made on the addition of bogus purchases is too high and remanded the matter to Income Tax Appellate Tribunal (ITAT) to adjudicate it.
Nitin Ramdeoji Lohia, the Respondent assessee is engaged in the business of trading in industrial oil and transport services. A return of income was filed by the assessee declaring a total income of Rs.4,47,970/-. The Sales Tax Department of the Government of Maharashtra provided information to the Assessing Officer (A.O.) giving names, addresses and details of persons, who had provided entries of bogus purchases.
The A.O. issued a notice under Section 148 of the Act, followed by the statutory notices under Section 143(2) and 142(1) of the Act and the order of assessment under Section 143(3) r/w Section 147 of the Act was passed on 30th March 2015 and total income assessed at Rs.1,46,82,548/-. The A.O. thus made an addition of Rs.1,42,34,578/- on account of alleged bogus purchases from Hawala dealers/parties.
The CIT(Appeals) allowed appeal inter alia on the ground that the A.O. has not disputed the sales, was not a case of bogus purchases and that it was at best a case of inflated purchases. The CIT (Appeals), however, thought that the gross profit shown by the assessee at 0.69% was very low in that particular kind of trade and, therefore, estimated the gross profit at 5% and further directed the A.O. to make an addition in the gross profit ratio and delete the balance addition made.
The assessee questioned the order to the extent the gross profit rate was calculated at 5% as against 0.69% declared by the assessee, which had resulted in an addition of Rs.10,59,974/-. The Tribunal held that the case of the Revenue was based on the investigation carried out by the Sales Tax Department only and that no cross-examination of the persons, whose names had figured in the list so prepared by the Sales Tax Department, was allowed.
A division bench comprising Justice K R Shriram & Justice Firdosh P Pooniwalla remanded the matter to the Tribunal only to the limited extent of going into the issue.
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